While to date, real estate lending intermediaries only have to overcome a few regulatory hurdles in Germany, this is going to change soon based on the European Residential Immovable Property Credit Directive, which is now being transposed into German law. The Directive requires that intermediaries have to provide a certificate of competence, in order to obtain an administrative license for their services in association with real estate loans.
Disclosure requirements for credit intermediaries
In addition, extensive disclosure requirements for credit intermediaries are being introduced, under which they will have to provide information on their identity and explain the characteristics of the products proposed to consumers prior to giving advice on real estate loans. Consumers will also have to be informed of any fees they should pay to credit intermediaries in relation to their services. The compensation structure of credit intermediaries will also become more complicated. Under the new rules, they will not be allowed to give advice according to compensation models that conflict with consumers’ best interests. Many bonus systems will therefore have to be reviewed.
Violations punishable in 2016
Companies intending to act as credit intermediaries for residential immovable property in Germany or in any of the EU Member States should seek early regulatory advice. Planned transitional periods are short and violations of the new rules will be punishable by fines already in 2016.