Banks are required to provide more information when a revolving loan is contracted

After multiple complaints about revolving loans against banks, today the new regulations imposed by the Bank of Spain come into force in circular 3/2022 of March 30, which includes the new operations when granting this type of loan .

Thomas Osborne
Thomas Osborne
06 October 2022 Thursday 00:43
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Banks are required to provide more information when a revolving loan is contracted

After multiple complaints about revolving loans against banks, today the new regulations imposed by the Bank of Spain come into force in circular 3/2022 of March 30, which includes the new operations when granting this type of loan .

The new guidelines require the financial institution to present the client with a representative copy of the loan before contracting the revolving credit, which includes information on the credit limit, the total amount owed, the interest rate applied, the APR, the repayment period and the installment to be paid. The bank example must show at least two financing alternatives.

And if the final contract includes two or more modalities of deferred payment with interest and at least one of them is the revolving modality, it must include an example of financing for each modality. In general, a credit limit of 1,500 euros will be used, unless the client requests another amount. In addition, the financial institution will have to periodically send formulas that include savings scenarios. If the repayment installment is less than 25%, the bank must provide information on three savings scenarios that will simulate the amount of installments that would have to be paid if the repayment installment were increased by 20%, 50% and 100%, reports EP. The three scenarios also have to indicate the final installment to be paid, as well as the breakdown of how much is interest and how much is principal.

The problem that there has been with revolving loans in recent years is that the debt derived from the credit is renewed monthly, reducing with the installment payments and increasing with the use of the card and with the interest, commissions and expenses generated. In this way, if the installment to be paid each month is very low compared to the amount of the debt, the repayment of the principal is carried out over a very long period, which greatly increased the interest that had to be paid.

Despite being a modality that pays a lot of interest, the population continues to use this type of loan. Specifically, the safe deposit of deferred payment credits and revolving cards amounted to 11,604 million euros, which is 15.3% more than at the beginning of the year. In August, the figure rose 2% from July, but 19% from the same month last year. Some economists attribute this boom in the use of revolving cards to the rise in inflation, which stood at 10.5% in August, which raises the cost of living for citizens.