Rules for consumer credit: contracts, information and protection

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1. The Law applies to contracts where a business grants a consumer credit for personal needs, such as deferred payment, a loan or a credit line. Credits under 25,000 pesetas and over 3,000,000 are excluded, though the latter still follow the advertising and information rules.
2. Contracts must be in writing, with as many copies as parties, and must include mandatory details: the annual percentage rate, the payment schedule and the elements of the total cost of the credit. Missing the written form makes the contract null; missing required details reduces the consumer's obligations.
3. The total cost of the credit cannot be changed to the borrower's detriment unless both parties agree in writing, tied to an objective reference index. The consumer may repay the loan early, in full or in part, with compensation capped at 1.5% or 3% of the amount repaid early, depending on the contract.
4. If a purchase contract is linked to obtaining a credit, failing to get the credit makes the contract ineffective. The consumer can also claim their rights against the business that granted the credit when there is an exclusive prior agreement between that business and the seller, and the goods were not delivered or do not match the contract.
5. If the credit grantor assigns its rights to a third party, the consumer can raise the same defenses against that third party as against the original creditor. Improper charging triggers statutory interest, and if there was bad faith or negligence, compensation of at least the statutory interest plus five points.
6. Before signing, the consumer may request a binding offer with all the credit conditions, valid for at least ten business days. Advertising that mentions the interest rate must also state the annual percentage rate with a representative example. For overdrafts on checking accounts, the rate cannot produce an annual percentage rate above 2.5 times the legal rate of interest.

Who it affects

• Consumers taking credit to buy goods or services for personal use: They get protection: written contract, mandatory information, early repayment and the right to claim against the lender in certain cases.
• Businesses that grant credit or finance sales: They must follow the rules on form, content, advertising and cost changes, with penalties if they do not.
• Credit institutions and finance companies: Chapter III rules apply to them only if there is no specific sector regulation, and non-compliance counts as an organizational and disciplinary offense.
• The Government: It must submit a bill to amend Law 50/1965 and may update the Law's monetary thresholds by Royal Decree.

Words worth knowing

Tasa anual equivalente (TAE)

The total cost of the credit expressed as an annual percentage of the amount lent. It lets you compare offers.

Coste total del crédito

All interest and charges the consumer must pay for the credit, including insurance required to grant it.

Descubierto

Overdraft: when a checking account goes negative and the bank automatically lends money.

Oferta vinculante

Binding offer: a document with all the credit conditions that the business must keep for a minimum period.

Excepciones oponibles

Defenses the consumer can raise against whoever demands payment, even if it is not the original business.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries