Borrowing: Consumer Credit Act

When a consumer takes out a loan for whatever reason, he or she will come into contact with a number of laws and regulations surrounding borrowing. One of these laws is the Consumer Credit Act. This law protects the consumer during the entire term of the loan taken out. However, this does happen under conditions. The Consumer Credit Act (Wck) protects consumers when taking out a loan. The protection is valid under certain conditions for the entire term of a loan. One of these conditions, for example, is that the loan may not exceed EUR 40,000 and that its term must be longer than three months. However, there are more conditions.

Borrow from a professional lender

The Wck stipulates that borrowers are only eligible for consumer protection if their loan is provided by a professional lender. Loans from family members, friends, neighbors, etc. therefore do not fall under the protection of the Wck. In addition, the lender must have a permit under the Wck. The Netherlands Authority for the Financial Markets manages a register in which all license holders are registered (this register can be found on their website). Credit intermediaries are only supervised by the Netherlands Authority for the Financial Markets and do not need to have a license because they do not run a financial risk.

Wck does not apply to mortgage loans

The Wck does not apply to mortgage loans. But since the law only applies to loans up to EUR 40,000, a mortgage loan (which is almost always much higher) would very rarely fall under this scheme. Furthermore, the Wck does not apply to securities lending if the loan remains below the value of the underlying securities portfolio (this serves as collateral). Finally, the Wck does not apply to entrepreneurs.

Conditions for lenders

The total cost of the loan must be determined by the lender; in other words, the effective interest rate for normal payment behavior must be fixed. Furthermore, a lender must check whether a borrower is creditworthy when the loan is higher than 1000 Euro. This can be done, among other things, by checking the data at the Credit Registration Bureau (BKR) in Tiel. In addition, for a loan of such an amount, the payment arrangement must be laid down in writing in a credit agreement (this is always required, even with small loans, but the conditions are usually less strict). Finally, a lender may not demand repayments and installment repayments early, or increase a borrower’s obligations in the meantime. However, there are exceptions to this rule: for example, when the borrower leaves the Netherlands, goes bankrupt, has payment arrears, loses his collateral, dies, or has obtained the loan based on incorrect information. In these cases, the lender may indeed demand repayments early.

Borrower’s rights

A borrower is always entitled to a written statement of reasons if his or her loan application is rejected. However, a lender is not obliged to do this automatically; the applicant must request this himself. A borrower always has the right to repay part of the loan or the entire loan early. However, in such cases the lender may require that the borrower make this simultaneously with an installment payment and adjust the repayment amount to an amount corresponding to a multiple of the initially determined installments. Furthermore, the lender may recover any additional costs from the borrower in such cases.