Estonia, Financial Services

Shortcomings regarded the obligation to provide precontractual information, withdrawal from the contract, early repayment, as well as implementing the principle of responsible lending, the Consumer Protection Board said.

In 2016, a bill of amendments entered into force that required creditors and credit intermediaries to reorganize their operation pursuant to the new requirements. The Consumer Protection Board has for two years been checking businesses' activities regarding giving precontractual information to consumers, general terms of consumer credit contracts and implementing the principle of responsible lending.

Prior to entry into a consumer credit contract, a creditor or credit intermediary is obliged to provide the consumer with precontractual information, so that the consumer can consider the contract and compare different offers. The information must be presented using a Standard European Consumer Credit Information form, and in case of contracts relating to residential immovable property, on a European Standardized Information Sheet.

The Consumer Protection Board announced it is important to know that generally, the information forms may not be changed or updated, except in specific cases. Altering the framework, the wording of the information submitted or the format of the text are all considered changes. Thus, every minor change in wording or format is a violation, which is why the number of violations detected was so large.

A total of 48 companies had violated the requirement of providing precontractual information or had shortcomings regarding the issue. Of the 48, nine companies had committed violations with regard to both types of information form. Using an incorrect form for submitting information was the most common violation as creditors must provide information on a specific form, depending on if the credit issued is related to residential immovable property or not.

The Law of Obligations Act stipulates several provisions which creditors and credit intermediaries cannot diverge from to the detriment of the consumer when entering into a contract. Regarding this matter, the Consumer Protection Board detected shortcomings on 36 occasions. The violations concerned withdrawal deadlines, which are different in a so-called regular credit contract and in a contract relating to residential immovable property.

The violations also concerned charging an interest upon cancellation of a credit contract and the consumer's right for early repayment. The checks performed indicated that many creditors have not updated their terms and conditions after the directive on mortgage credit was adopted in the Law of Obligations Act in 2016.

The Consumer Protection Board discovered that on 10 occasions, the information published on the companies' web pages was not in accordance with the principle of responsible lending. For instance, it is considered incorrect if it is announced on the company's web page that applicants' prior credit history is irrelevant when applying for credit.

The board additionally detected on five occasions implementation of unfair commercial practice prohibited by the Consumer Protection Act. For example, several creditors described their services as banking services, whereas the company did not have an authorization of credit institution, thus the company was not a bank.

All creditors and credit intermediaries that were subject to the Consumer Protection Board's checks have brought their forms for providing precontractual information and general terms into conformity with the Law of Obligations Act and removed the information contrary to the the principle of responsible lending from their websites.