LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
Loans to Consumers Specific mandatory rules apply to credit agree - ments between a consumer and a lender acting in the context of any business activity. Lenders providing consumer credit need to be licensed either by the CSSF or in accordance with the Law of 2 September 2011 relating to the estab - lishment of certain businesses and business licences. According to the Luxembourg Con - sumer Code, provisions on consumer credit apply to agreements under which the creditor grants consumer credit in the form of a deferred payment, loan or other similar financial accom - modation, if, among others, the total amount of the credit is between EUR200 and EUR75,000. Specific obligations apply to the contractual rela - tionship, which relate namely to the pre-contrac - tual information, assessment of the consumer’s creditworthiness, content of the agreement, right of withdrawal and right of early repayment of the credit. In addition, similar obligations apply to mortgage credit agreements, ie, agreements where a creditor grants a credit to a borrower in view of the acquisition of a residential immov - able property. Loans in a Professional Context The legal framework applicable to non-consum - er loans includes fewer mandatory provisions, as general principles of contract law apply to the loan agreements. However, providing lend - ing activities even in a professional context is in principle a regulated activity. According to the Financial Sector Law, professionals performing lending operations, ie, professionals engaging in the business of granting loans to the public for their own account, are subject to authorisation by the CSSF. 4.2 Underwriting Processes The underwriting process used by industry par - ticipants typically varies depending on the type
of borrower and the type of credit. Specific regu - latory requirements apply, namely in relation to AML/CFT obligations and consumer protection. Obligations Relating to AML/CFT All professionals operating in the financial sector typically need to comply with obligations relat - ing to AML/CFT (see 2.14 Impact of AML and Sanctions Rules ). In particular, the AML Law requires professionals to establish a customer acceptance policy adapted to their activities and to apply customer due diligence measures when establishing a business relationship. These KYC obligations include identifying and verify - ing the customer’s and the customer’s ultimate beneficial owner’s identities, and it may also be conducted through an online video conference. Specific Obligations Relating to Consumer Lending If a loan is qualified as a consumer credit agree - ment (see 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities ), the lender must adhere to certain pre-contractual obligations. Prior to entering into a consumer credit agreement, the lender must provide the consumer with the necessary information to compare the different consumer credit proposals in order to make an informed decision, which is provided by using a standard European consumer credit informa - tion form. In addition, the lender must assess the consumer’s creditworthiness on the basis of sufficient information. Lastly, consumer credit agreements must be drawn up on paper or other durable medium, and each party must be pro - vided with a signed copy of the agreement. 4.3 Sources of Funds for Fiat Currency Loans Fiat loans may be funded from a variety of dif- ferent sources, and depending on the source of
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