Bréfaskipti Dr. Elviru Mendez í árslok 2012 við framkvæmdastjórn Evrópusambandsins um verðtryggingu í ljósi neytendaréttar, ásamt svörum með lögfræðilegu áliti um afstöðu framkvæmdastjórnarinnar.
UNIVERSITY OF ICELAND SCHOOL OF SOCIAL SCIENCES FACULTY OF LAW M. Elvira Mendez Pinedo. Professor of European law. Lögberg 306. University of Iceland. Tel. + 354 5255224. E-mail: [email protected]To the European Commission Attention: Commissioner Tonio BORG- Health and Consumer Policy and Commissioner Štefan FÜLE - Enlargement and European Neighbourhood Policy Copy to EFTA Surveillance Authority Reykjavík, 3 rd December 2012 Reference: European consumer credit and mortgage law. Petition to the European Commission to assess the legality of the price-indexation practice in Iceland (verðtrygging) in the light of Directives 2008/48/EC as recently modified, Directive On Unfair Contract Terms 1993/13/EEC, Directive On Unfair Commercial Practices 2005/29/EC and general principles of consumer credit law. Dear Mr. BORG and Mr. FÜLE, As a researcher specialised in the field of European consumer law and currently working on consumer credit and mortgages issues, I have been requested by the Icelandic Parliament to issue a legal opinion and give advice on the compatibility with European Law of the newest Icelandic legislative proposal on consumer credit law submitted by Minister Steingrímur J. Sigfussón 1 . Following my research I have a strong conviction that the legislative proposal - which intends to incorporate Directive 2008/48/EC to the domestic legal order conciliating the duty to disclose information about financial commitments ex-ante (total cost of credit and APCR rules) with an Icelandic unique practice of indexation of the principal of the loan to the consumer price index a posteriori does not in fact comply with some fundamental requirements of European consumer credit law as it is understood and constructed by EU institutions. In this letter i request the Commission to give guidance concerning several issues. Before submitting some questions I will explain the background of the problem. 1 See proposal in Icelandic at http://www.althingi.is/altext/141/s/0228.html Logberg v. Sudurgotu • 101 Reykjavik • Telephone: (+354) 525 4376 • Fax: (+354) 525 4388 * [email protected] • www.lagadeild.hi.is 1
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UNIVERSITY OF ICELAND
SCHOOL OF SOCIAL SCIENCES FACULTY OF LAW
M. Elvira Mendez Pinedo. Professor of European law.
Lögberg 306. University of Iceland. Tel. + 354 5255224. E-mail: [email protected]
To the European Commission
Attention: Commissioner Tonio BORG- Health and Consumer Policy and Commissioner Štefan FÜLE -Enlargement and European Neighbourhood Policy
Copy to EFTA Surveillance Authority
Reykjavík, 3 r d December 2012
Reference: European consumer credit and mortgage law. Petition to the European Commission to assess the legality of the price-indexation practice in Iceland (verðtrygging) in the light of Directives 2008/48/EC as recently modified, Directive On Unfair Contract Terms 1993/13/EEC, Directive On Unfair Commercial Practices 2005/29/EC and general principles of consumer credit law.
Dear Mr. BORG and Mr. FÜLE,
As a researcher specialised in the field of European consumer law and currently working on consumer credit and mortgages issues, I have been requested by the Icelandic Parliament to issue a legal opinion and give advice on the compatibility with European Law of the newest Icelandic legislative proposal on consumer credit law submitted by Minister Steingrímur J . Sigfussón 1.
Following my research I have a strong conviction that the legislative proposal - which intends to incorporate Directive 2008/48/EC to the domestic legal order conciliating the duty to disclose information about financial commitments ex-ante (total cost of credit and APCR rules) with an Icelandic unique practice of indexation of the principal of the loan to the consumer price index a posteriori does not in fact comply with some fundamental requirements of European consumer credit law as it is understood and constructed by EU institutions. In this letter i request the Commission to give guidance concerning several issues. Before submitting some questions I will explain the background of the problem.
1 See proposal in Icelandic at http://www.althingi.is/altext/141/s/0228.html
1. Icelandic legislation and the equal treatment of secured and non-secured loans for consumer protection purposes
Since December 2000, Icelandic legislation gives identical consumer protection to all loans both secured (mortgages) and non-secured (credit). The intention of the legislator is thus to continue to afford identical protection to all credit extending the scope of Directive 2008/48/EC. This is allowed by EU/EEA law as the latest case-law from the European Court of Justice confirms. The legislator also intends to increase the level of consumer protection regarding small loans and setting interest caps to prevent usury which I also understand as complying with EU/EEA law as it is left to their discretion.
2. European legislation on the definition, method, formula to disclose total cost of credit in the way prescribed by Directive 2008/48/EC
Directive 2008/48/EC on consumer credit law, the Directive On Unfair Contract Terms 1993/13/EEC, the Directive On Unfair Commercial Practices 2005/29/EC, the proposal on credit for residential property COM(2011)142 as well as the general principles of consumer law established by the Court of Justice of the European Union define the framework of legal obligations for EU/EEA Member States regarding the information disclosure duties, the methodology used to calculate total cost of credit and Annual Percentage Rates of Charge and the prohibition of abusive clauses in detriment of consumers.
The most recent legal argumentation of the Commission on full harmonisation, consistency and interpretation regarding "total cost" of credit is the following:
For reasons of legal certainty, the Union framework in the area of credit agreements relating to residential immovable property should be consistent with and complementary to other Union acts, particularly in the areas of consumer protection and prudential supervision. Essential definitions of terms such as 'consumer', 'creditor', 'credit intermediary', 'credit agreements' and 'durable medium' as well as key concepts used in standard information to designate the financial characteristics of the credit, such as the total cost of the credit to the consumer, the total amount payable by the consumer, the annual percentage rate of charge and the borrowing rate, should be in line with those in Directive 2008/48/EC so that the same terminology refers to the same type of facts irrespective of whether the credit is a consumer credit or a credit relating to residential immovable property. Member States should therefore ensure in the transposition of this Directive that there is a consistency of application and interpretation.2
In order to promote the establishment and functioning of the internal market and to ensure a high degree of protection for consumers throughout the Union, it is necessary to ensure the comparability of information relating to annual percentage rates of charge throughout the Union. The total cost of the credit to the consumer should comprise all the costs that the consumer has to pay in connection with the credit agreement, except for notarial costs, It should therefore include interest, commissions, taxes, fees for credit intermediaries and any other fees as well as the cost of insurance or other ancillary products, where these are obligatory in order to obtain the credit on the terms and
conditions marketed. As the annual percentage rate of charge can at the pre-contractual stage be indicated only through an example, such an example should be representative. Therefore, it should correspond, for instance, to the average duration and total amount of credit granted for the type of credit agreement under consideration. Given the complexities of calculating an annual percentage rate of charge (for instance, for credits based on variable interest rates or non-standard amortisation) and in order to be able to accommodate product innovation, technical regulatory standards could be employed to amend or specify the method of calculation of the annual percentage rate of charge. The definition of and methodology used for calculating the annual percentage rate of charge in this Directive should be the same as those in Directive 2008/48/EC in order to facilitate consumer understanding and comparison. Those definitions and methodologies may, however, differ in the future should Directive 2008/48/EC be modified at a later date. Member States are free to maintain or introduce prohibitions on unilateral changes to the borrowing rate by the creditor.3
As the European Commission explains in the website the application of Directive 2008/48/EC is not easy and some guidance has been given on several questions.
To help Member States to correctly apply the Consumer Credit Directive, the Commission published on 8 May 2012 Guidelines on the application of the Directive 2008/48/EC in relation to costs and the Annual Percentage Rate of charge. They provide comprehensive explanations how to delineate the total cost of credit, in particular to be included in the calculation of APR, and how to apply assumptions as amended by the Directive 2011/90/EU (http://ec.europa.eu/consumers/rights/docs/guidelines_consumer_credit_directive_swd2012_128_en .pdf)
The Commission has published a final report of the study which adapts the examples to Directive 2008/48/EC and the products marketed in the EU. It explains the calculation method and the way the cost of the credit and anatocism are reflected in the APR, together with the analysis of the assumptions used for the calculation of the APR, The report presents an analysis of the regulatory framework, the technical and financial aspects of the APR and the reality of the market for consumer credit agreements in the EU areas with respect to the relevant aspects regarding the disclosure and calculation of the APR. It provides a new set of examples for the calculation of the APR and extends the possibilities of obtaining the APR on consumer credit agreements for interested parties by providing an Excel simulator for the calculation of the APR coherent with the new Directive (http://ec.europa.eu/consumers/rights/docs/study_APR_en.pdf)
A simulator was developed as part of APR study. It can be used until 31 December 2012 when the one adapted to Directive 2011/90/EC will be available (available at http://ec.europa.eu/consumers/rights/fin_serv_en.htm)
3. An example of a loan with price-indexed principal as usually calculated in Iceland
Please see the example provided in the document annexed entitled "The explosive loan machine" by
Guðmundur Ásgeirsson from the consumer association Samtök heimilanna (Association of Homes
In this example we clearly see how a principal of 20 million ISK, with an interest rate of 4,5% and inflation of 5,98% gives way to a final payment of 169,127,914 ISK.
With a consumer price -indexed loan and annuity repayment plan, as calculated by Icelandic banks the payments done after 40 years are:
Total payments based on indexation of credit calculated a posteriori: 83,946,153
Total payments based on capital: 103,946,153
Total payment for interest: 65,088,161ISK
Invoice fees: 93,600
Grand total of 169,127,914
What is interesting to note is the methodology followed.
3.1. Creditors are allowed by a Regulation of the Central Bank to do unilateral changes to the principal of a loan borrowed a posteriori and to the borrowing cost of capital also a posteriori. The Icelandic methodology to charge interest is therefore to continuously update the principal and interest payments with real inflation rather than to offer financial credit with nominal interest rates predicted beforehand.
3.2. Please note that Icelandic Act on interest and indexation 38/2001 only allows indexation of payments so that, in my view, the regulation of the Central Bank goes beyond the scope of the law and so do financial institutions when they engage in this practice.
3.3. Please note that consumers are usually not informed at the precontractual stage of the impact of future inflation upon their contracts. Sometimes the inflation is announced as 0%. Some other times it is left for the consumer to predict future inflation.
3.4. The methodology of calculating inflation affecting the principal of the loan and the payments is an index elaborated by the Statistical Office of Iceland which reflects 3 year previous inflation. The Index for mortgage payment adjustment 2008-2012 can be accessed and calculated at the webpage http://www.statice.is/Statistics/Prices-and-consumption/Wage-index
3.5. In fact, when consumers commit to their future financial obligation they ignore the future total amount of credit and the future cost of the credit as inflation is unpredictable and the methodology to update both principal and indexation costs with inflation (real interest) is opaque and not disclosed.
3.6. This methodology of price-indexation a posteriori is used for the so-called price-indexed loans concerning credit (ie. car loans) or residential property (ie. mortgages).
3.7. Please note that, in spite of this practice of ex-post price indexation of financial obligations to charge for real inflation a posteriori, financial institutions also charge for interest (fix or variable). For instance, Icelandic House Financing Fund offers interest rates of 4,20 or 4,70% http://www.ils.is/einstaklingar/kjor-og-kostir/lan-ibudalanasjods/). Financial institutions charge for nominal interest calculated before hand and, at the same time, for real interest calculated a posterior. They charge two times for interest in a different way.
4. Questions for the European Commission
A firm and clear reply from the services of the European Commission is requested on these questions as the Directive 2008/48/EC is a maximum harmonisation measure on issues such as the total cost of credit and APCR rules:
1. When EU/EEA law refers to the total cost of credit, does the terminology and hypothesis refer to the repayment of the principal borrowed plus a nominal interest previously agreed between creditor and debtor or to the repayment of the principal borrowed plus a real interest calculated with inflation after the signature of the loan agreement?
2. Can EU/EEA Member States allow for the calculation of cost of credit outside the APCR rules?
2. Does European law allow creditors of non-secured credit falling under Directive 2008/48/EC to do unilateral changes to the principal of a loan borrowed a posteriori in order to update that principal with inflation? What about unilateral changes to the payments of a loan done a posteriori in order to update those payments with inflation?
3. Can EU/EEA Member States introduce by law permissions for creditors to do unilateral changes to the principal of a loan borrowed a posteriori for non-secured credit falling under Directive 2008/48/EC which updates that principal with inflation and regularly consolidate interest non paid through negative amortisation into unpaid capital (minimum payment of interest similar to revolving credit card schemes which leads to anatocism -interest on interest)?
4. Can EU/EEA Member States introduce by law permissions for creditors to do unilateral changes to
the borrowing cost of capital a posteriori in any other way for non-secured credit falling under
Directive 2008/48/EC?
5. Can EU/EEA Member States introduce by law permissions for creditors to do unilateral changes to the borrowing cost of capital a posteriori for non-secured credit falling under Directive 2008/48/EC if the price-indexation affects only the payment of interests (as current Icelandic Act 38/2001 states)?
6. In case reply to question 1-5 is affirmative, how would this price-indexation affecting both principal and payment of interests (charge of real interest calculated a posteriori) could be disclosed to consumers through the formulas on total cost of credit and Annual Percentage Rates of Charge in advance and in a transparent way so to comply with Directive 2008/48/EC as recently modified?
7. Is it possible for financial institutions to charge two times for interest (1) through nominal interest rates previously disclosed and 2) through indexation of principal and/or payments to real inflation done a posteriori?
8. What is the current margin of manouver for regulating information duties on total cost of credit in residential property credit? Can EU/EEA Member States introduce by law permissions for creditors to do unilateral changes to the principal of a loan and/or to the borrowing cost of capital a posteriori (through consumer price-indexation clauses) for secured credit falling under new Proposal COM (2011) 142 for credit on residential property?
9. On one hand, the Directive On Unfair Contract Terms 1993/13/EEC and the Directive On Unfair Commercial Practices 2005/29/EC contain a general ban and prohibition of abusive clauses in contracts and commercial practices with an explicit requirement of fairness. Abuse is defined by lack of balance between rights and obligations in contracts in detriment of consumers. Misleading information is considered abusive practice. The ECJ has declared that terms that are found unfair under the Directive are not binding for consumers (see CJEU, among others Case C-240/98 Océano Grupo Editorial SA v Roció Murciano Quintero)
On the other hand, it is a proven fact and widely recognised in Iceland that price-indexation of credit and mortgage as it is currently practiced by financial institutions passes all the risk and consequences of inflation to consumers who cannot protect/insure themselves against this risk. Contrary to Europe, creditors are the only parties secured against inflation through real interest rates (which they charge together with nominal rates). Financial institutions are therefore not encouraged for responsible lending and debtors end up inevitably overindebted which is not responsible borrowing.
Questions:
9.1. Is the price-indexation of the principal of a loan and the borrowing cost of capital with an opaque and non-disclosed method of calculation which guarantees a claim on real interest rate calculated unilaterally by creditor after the signature of the contract -together with other interest rates- an abusive clause in the light of European law?
9.2. As calculation of future inflation and its impact on the total amount of credit and total cost of credit cannot be disclosed in advance, are creditors who do not disclose the impact of future inflation giving misleading information to consumers?
9.3. Does European law allow national legislators to justify abusive clauses through information and
disclosure requirements?
5. Why guidance is needed specifically from the European Commission regarding application of
Consumer Credit Directive.
In view of the complexity of the European legislation and the difficulty to adapt Icelandic business practices to the requirements of the EU/EEA internal market,it is thus essential to clarify the issue
before the legislator takes a final decision. The reasons why I address this petition to the European
Commission are the following:
Icelandic consumer credit legislation has to be nevertheless assessed by the European Commission in the framework of the accession negotiations to the EU now in progress. It is too early to send a formal complaint to the EFTA Surveillance Authority (ESA) while the
legislation is under preparation. At the same time, the ESA has already started an infringement procedure against Iceland for the late incorporation of Directive 2008/48/EC to the domestic legal order. Recent experience with the problem of illegal foreign-indexed loans in Iceland shows that the EFTA Surveillance Authority unfortunately does not have the same research capacity, historic memory and overview of the situation in 30 EEA Member States concerning consumer credit and mortgage law. Their competences under the EEA Agreement are more limited regarding fundamental rights and do not enjoy a presumption of compliance with the European Convention of Human Rights as Judge ECtHR David Þór Björgvinsson declared in a Conference organised by the EFTA Court in Iceland in 2012. Because EEA law is mostly economic law and a mix between international law and EU law, there is a serious risk that the ESA favours internal market considerations over consumer protection issues which touch economic fundamental rights such as property rights (due to their lack of competence in this regard). Last but not least, in the last instance, ESA relies on the expertise and final assessment of the European Commission. The jurisdiction of the Court of Justice of the European Union (ECJ) on EFTA and EEA matters is very restricted and limited to disputes not settled by the EFTA Joint Committee (Article 111 para. 3 EEA Agreement). Access to the ECJ is almost impossible in practice. Apart from a real complaint needed, access to the ECJ through a preliminary reference procedure by a petition from a district court in Iceland (Protocol 34 EEA Agreement) would be probably denied by the Supreme Court of Iceland for reasons due to constitutional constraints and Icelandic procedural law since their constitutional role is to preserve the autonomy of the Icelandic legal order.
In view of all the above information, it is extremely important for Icelandic legislator and Icelandic society to clarify this problematic as soon as possible. I request therefore the services of the European Commission to provide this guidance needed and to reply as clearly as they can to the questions 1-9 in two weeks since reception of this request.
I send the same request to the EFTA Surveillance Authority so that your institutions collaborate
REF: INCORPORATION DIRECTIVE 2008/48/EC TO ICELAND
To the European Commission, European Parliament and EFTA Surveillance Authority,
Following my letter of 4 December 2012, I would like to provide you with a current real example of recent payments of two price indexed loans by a consumer in lceland. For personal data protection I request not to disclose the identity of this individual.
1. EU and EEA consumer credit legislation - obligations for lceland
lceland is obliged to incorporate all relevant legislation through the EEA Agreement. Please note that the lcelandic legal system incorporated the obligations of Directive 87/102/EEC through Act nr. 121/1994 on consumer credit and extended protection to all loans (secured or non-secured by immovable property or other guarantees) through Act nr. 179/2000.
European Directive 87/102/EEC in Article 6 imposes ex-ante obligation information of the total cost of credit and annual rate of interest and the charges applicable from the time the agreement is concluded and the conditions under which these may be amended. This information had to be confirmed in writing. Furthermore, Article 6 states that, during the period of the agreement, the consumer shall be informed of any change in the annual rate of interest or in the relevant charges at the time it occurs. Such information may be given in a statement of account or in any other manner acceptable to Member States.
Similar and more detailed provisions can be found in the lcelandic Act. Nr. 121/1994 (as reformed in December 2000) in articles 5-12.
The question now is to examine the validity of current lcelandic framework and business practices in the light of the newest Directive 2008/48/EC which is discussed by the lcelandic Parliament.
2. Credit and cost of credit. What is commonlv practiced in Europe
The European Directive 2008/48/EC works with the hypothesis, definition, methods and formula supposing we have a clear principal of a loan determinate. Consumers must know the total cost of the credit in advance and the Annual Percentage Rate of Charge (APRC).
As the website of the European Commission summarises the content of Directive 2008/48/EC2
1 lcelandic Act No 121/1994 on Consumer Credit can be accessed in English at the website http://eng.idnadarraduneyti.is/laws-and-regulations/nr/1137 2 See summary from the European Commission at webpage http://ec.europa.eu/consumers/rights/fin_serv_en.htm
"Further integration of the markets and a high level of consumer protection are the main objectives of the new Directive on Credit Agreements for consumers . The Directive focuses on transparency and consumer rights. It provides for a comprehensible set of information to be given to consumers in good time before the contract is concluded and also as part of the credit agreement, In order to enhance the comparability of different offers and to make the information better understandable, the pre-contractual information needs to be supplied in a standardised form (Standard European Consumer Credit Information), i.e. every creditor has to use this form when marketing a consumer credit in any Member State, and consumers wlll receive the Annual Percentage Rate of Charge (APR, a single figure, harmonised at EU level, representing the cost of the credit)."
In order to charge for credit, European financial institutions in Europe usually consider two main options: the payment of nominal interest charges agreed beforehand (fix rates of interest) or revisable regularly (variable rates).
In Europe clients usually pay back credit in this way:
Small part of the principal every month
Interest on the principal (fix or variable nominal rates agreed before hand)
3. Credit and cost of credit. What is commonly practiced in lceland
In lceland clients can pay back credit to financial institutions under 4 different concepts : (as in the
example from House Financing Fund in annex 1 and 2)
1. Repayment of principal of loan at a nominal price
2. Payment due to price indexation of principal (calculated ex-post)
3. Payment of interest on principal initially agreed (5,1%)
4. Payment due to price indexation of interest (calculated ex-post)
Two comments must be made here.
In the first place, the payment done under nr. 2 above is usually done with the scheme of negative amortisation (called annuitet). This means that only a part of the real cost of the indexation of the principal is payed each month. Most of it is consolidated into the principal, so a new principal due is created each month.
In the second place, this scheme means that consumers are paying in practice three sorts of different interest as the cost of borrowing the same principal. As the inflation is unpredictable all the calculations of final figures to be paid by consumers are done after the contract is signed.
4. Case-study. Two loans taken from the House Financing Fund of lceland.
As it can be seen in the payment of the two bills in annex 1 and annex 2, European legislation has had no real impact on consumer protection in lceland so far. This is so even if legislation adopted in December 2000 extended the protection of consumer credit provisions originating in Directive 87/102/EC to ali kinds of credit, including mortgages for residential property.
A consumer who took two different loans , one in 1999 and other in 2003, from the same institution (Íbúðalánasjóður- House Financing Fund) -has trusted us with these documents as evidence for the claims put forward in this letter. In the loan agreement signed it says that the principal will change with consumer price index, but no attempt is ever made by the lender to explain what that means in practice, which method of calculation is followed or how this indexation has evolved over time.
Furthermore this consumer was never properly informed of:
Total amount of loan (principal) in reality
Total cost of credit in reality
Annual rate of interest through Annual Percentage Rate of Charge
Payment plan with actual payments for the whole life of the credit
Payment for price indexation of principal and interest is calculated a posteriori, on the basis of real effective inflation. Financial institutions change unilaterally every month the amount of credit and total cost of credit on the basis of the price consumer index published by the Statistical Office of the country. 3
Loan 1.
Original amount borrowed in 1999 (credit) 4.900.000 ISK
but recalculated (with inflation until 15 August 2011) 10.062.500 ISK
Original amount equals to 61.350 Euros at the date of contracting
3 A unique specificity for the consumer price indexation in lceland is that real estate price index is included. To the best of my knowledge this is not a normal practice ín any other OECD country.
UNIVERSITY OF ICELAND
FACULTY OF LAW SCHOOL OF SOCIAL SCIENCES
Loan 2
Original amount borrowed in 2003 (credit) 2.196.824 ISK
but recalculated (with inflation until 15 August 2011) 3.675.903 ISK
Original amount equals to 25.236 Euros at the date of contracting
As inflation is never a negative figure, the principal of the loan grows only in one direction. Within some months the recalculation figures will be higher as the amount of credit and cost of credit will be adjusted.
The exponential growth of the principal is explained by simple arithmetic. With the so -called annuitet system a negative amortisation scheme is used so that clients do not reimburse all interest due and the rest is consolidated into the capitai. This is one of the reasons why the capital grows exponentíally, as it incorporates interest into the principal a never-ending way. The principal grows and so does interest. In reality, clients pay interest on interest on interest on interest... (extreme form of anatocism based on an opaque methodology). This has been commonly defined by specialists in consumer credit as an unethical lending practice very common in the USA business of credit cards.
5. The problem of price indexation - compatibility with EU-EEA consumer credit l a w - request for legal opinion
Verðtrygging or the indexation of financial obligations to inflation is, in reality, real interest calculated a posteriori (instead of nominal interest predicted by financial institutions ex-ante).
As I told you in my previous letter, it is my opinion that it is illegal in the light of European law to index the principal of the loan to inflation in the way it is practiced in lceland (ex-post). This is so because under lcelandic current system and legislative proposal this means that the principal is left indeterminate and is always unclear. Plan of payments is always wrong by definition as nobody can predict inflation. The total cost of credit announced and disclosed at the time of negotiations and contract signature is wrong. The information and transparency paradigms required by EU/EEA law fail to operate for future inflation.
It is my strong conviction that European consumer law has not been adopted on the hypothesis of real interest adjusted a posteriori with inflation and unilateral changes introduced to the contract by creditors as these examples show.
It is also my view that indexation of payments of interest (not the principal of the loan) could be acceptable if the method is properly disclosed ex ante (pre-contractual and contractual stages) and it is done in a transparent way within the framework allowed by the Directive (through the technique of Annual Percentage Rate of Charge) as the model supplied by the European Commission indicates.
For all these reasons I request a clarification of the position of the European Commission and the European Surveillance Authority in this regard.
M. Elvira Mendez Pinedo
PS. Together with Annexes 1 and 2 there is another document enclosed with the effective history of payments for the loans discussed. Please note that it is not a plan of payments but a summary of payments done. It is called Greiðsluyfirlit - , . This consumer never got a full plan of payments for the whole life of the credit at the contractual stage. Confidentiality is requested concerning the identity of this individual and the personal financial data disclosed.
Subject: Your letter on European consumer credit and mortgage law - registered under ref. ARES(2012)1452101
Thank you for your letter of 3 December 2012, to Commissioners Borg and Füle to which I reply on their behalf. In this letter you provide your assessment of Icelandic transposition of Directive 2008/48/EC on credit agreements for consumers.
I would like to draw your attention to the fact that it is the European Free Trade Association (EFTA) Surveillance Authority that is competent to supervise the transposition and application of Directive 2008/48/EC into the national legal order of Iceland.
As to the technical questions you raise in your letter, please find some feedback in the Annex to this letter that we hope will be helpful to you. Please note that this Annex constitutes an opinion of my services; a binding interpretation of Union law can only be given by the European Court of Justice. It is also provided to you for your own assistance and is without prejudice to the ultimate assessment of EFTA in relation to the transposition exercise.
Should you require additional clarification, please do not hesitate to contact Ms Maria Lissowska, email; [email protected],eu, tel +3222980905.
Yours sincerely,
EUROPEAN COMMISSION
HEALTH AND CONSUMERS DIRECTORATE-GENERAL
Director-General
Brussels, SANCO.B4/ML/at D(2013)69971
Ms Elvira Méndez-Pinedo Professor of European Law University of Iceland. Faculty of Law 306. Sudurgata s/n. 101 Reykjavik Iceland mailto:[email protected]
On the left column: Stamp and Identification of House Financing Fund (personal information about debtor deleted due to data protection legislation) Original amount borrowed 4.900.000 ISK Recalculated (with inflation until 15 August 2011) 10.062.500 Loan issued 12 February 1999 Fix interest rates of 5,100% per year Price indexed loan with "payment" (greiðslu) linked to the consumer index Consumer index 184,8 points Guarantee: PRINCIPAL Remaining nominal principal of the loan remaining to be paid before this payment 4.262.734 Nominal payment to the principal 5.867 Remaining nominal capital after payment 4.256.867 Due cost of credit (price indexation) after payment (as calculated on the date of 15 July 2011) 4.484.913 Remaining principal to be paid with price-indexed cost of credit after payment 8.741.780
On the right column: BOND due date 15 August 2011 Payment 147 of 478 of 15 August 2011 Payment system of annuitets (negative amortisation) Interest calculated from 15 July 2011 to due date of payment Interest period 30 days. Interest rate 5,100% Change of consumer price indexed from 184,8 to 379,5 points
Last day to pay without interest penalty surcharges is 29 August 2011 Last day to pay without extra service fees for non-payment is 14 September 2011
PAYMENT Payment (of principal) at a nominal price 5.867 Payment due to price indexation of capital 6.181 Interest 18.117 Payment due to price indexation of interest 19.088
Service fee 75 Total to be paid 49.328 ISK
UNIVERSITY OF ICELAND
FACULTY OF LAW SCHOOL OF SOCIAL SCIENCES
ANNEX 2
On the left column: Stamp and identification of House Financing Fund (personal information about debtor deleted due to
data protection legislation) Original amount borrowed 2.196.824 ISK Recalculated (with inflation until 15 August 2011) 3.675.903 Loan issued 16 July 2003 Fix interest rates of 5,100% per year Price indexed loan with "payment" (greiðslu) linked to the consumer index Consumer index 226,8 points Guarantee: PRINCIPAL Remaining nominal principal of the loan remaining to be paid before this payment 1.773.004 Nominal payment to the principal 5.479 Remaining nominal capital after payment 1.767.525 Due cost of credit (price indexation) after payment (as calculated on 15 July 2011) 1.190.040 Remaining principal to be paid with price-indexed cost of credit after payment 2.957.565
On the right column: BOND due date 15 August 2011 Payment 95 of 298 of 15 August 2011 Payment system of annuitets (negative amortisation) Interest calculated from 15 July 2011 to due date of payment Interest period 30 days. Interest rate 5,100% Change of consumer price indexed from 226,8 to 379,5 points
PAYMENT Payment at a nominal price 5.479 Payment due to price indexation of capital 3.689 Interest 535
Payment due to price indexation of interest 5.073 Service fee 75
Total to be paid 21.851 ISK
Last day to pay without interest penalty surcharges is 29 August 2011 Last day to pay without extra service fees for non-payment is 14 September 2011
