Federal law on consumer credit

The ” Federal Law on Consumer Credit ” ‘(abbreviation’ ” LLC ”) is a federal law applying in Switzerland with the objective of increasing the borrower’s protection against over- indebtedness . The st January 2003 the revised law took effect. The consumer credit law includes consumer loans and leases to natural persons, which have no business or commercial intention, credit and loyalty cards and bank overdrafts.

The Ordinance on the Federal Law on Consumer Credit (OLCC) promulgated by the Federal Council (Switzerland) (SR 221.214.11) regulates some special enforcement provisions, including the maximum interest rate of 10 % per year currently valid (State November 2017).

Types of loan

The law of consumer credit applies to the following types of credit or payment contract:

  • Current account bank overdrafts and
  • Account overdrafts, which the bank implicitly accepts
  • Credit cards and loyalty cards with credit option
  • Loans (especially financing credits), payment terms and similar financial support
  • certain leasing contracts

Exceptions

A bank overdraft does not fall under the Consumer Credit Act if it is:

  • guaranteed directly or indirectly by real estate pledges
  • covered by the deposit of a bank guarantee
  • covered by enough credits deposited by the consumer with the lender
  • less than CHF 500 or more than CHF 80,000
  • of a duration or the consumer must repay the credit in three months

In addition, the law applies only if the borrower is a natural person and the credit is going to be taken for private use.

Content of the contract

The consumer credit agreement is subject to fairly strict formal requirements. It must in all cases be in writing and contain the net amount as well as the APR , which are the total cost to the borrower and any other expenses. The planned repayment period with respectlive monthly payments must also be given. The contract must also contain a passage allowing the borrower a full refund of the total amount under interest reduction. The possibility of revocation must also be mentioned in the contract.

A particular form of the consumer credit agreement and the leasing contract for which this law also applies, but which is fully seen as a special case. The regulations for the content are different from those for the normal credit agreement. An immediate refund for example is not possible at any time, but on the contrary, in case of termination of the contract, the borrower owes money to the lessor for this termination.

Verification of credit capacity

According to Article 28 of the Federal Law on Consumer Credit, the examination of the ability to take out consumer credit is compulsory 1 . A consumer is considered solvent if the monthly payment does not exceed the seizable portion of the income. In this case, a refund in a maximum of 36 months is presumed. The maximum amount of credit is determined by the law, therefore the seizable part of the income is multiplied by 36.

Right of revocation of the borrower

The borrower may revoke in writing a bank overdraft within 14 days of receipt of the copy of the contract intended for him. The borrower has no right of revocation if he tacitly accepts bank overdrafts.

Maximum interest rate

The maximum interest rate has been reduced from 15% to 10% 2 . The new maximum interest rate of 10% has been in effect since July 1, 2016 3 .

Mandatory notification

The law states that the lender must advertise the consumer credit or leasing contract granted to the intelligence center. For accounts linked to a credit card or customer card with a credit option, the obligation to advertise applies only from an outstanding amount of CHF 3’000.

Credit Brokerage

In accordance with Article 39 of the Federal Law on Consumer Credit, authorization is required for commercial credit brokerage in Switzerland. This is issued by the canton in which the credit broker has its seat 4 . It is forbidden to credit brokers to charge brokerage fees or processing 5 .

Federal Law against Unfair Competition (LCD)

In addition to the CCL, Articles 3k-n of the Federal Law against Unfair Competition also apply. In particular Article 3n, which provides that the granting of credit is prohibited if it leads to over-indebtedness of the consumer.

See also

  • Credit Information Center (ZEK): Information center in Switzerland for credit information of credit activities

External links

  • Federal Law on Consumer Credit (LCC)  [ archive ]
  • Ordinance on the Consumer Credit Act (OLCC)  [ archive ]
  • Federal Law against Unfair Competition (LCD), Art. 3  [ archive ] ]

Notes and references

  1. ↑ Federal Law on Consumer Credit (LCC) of 23 March 2001  [ archive ] (State Nov. 7, 2017)
  2. ↑ Ordinance on the Federal Law on Consumer Credit (OLCC)  [ archive ] (Status on 7 November 2016)
  3. ↑ The Federal Council lowers the maximum interest rate on consumer credit  [ archive ] (Press release of December 11, 2015)
  4. ↑ Federal Law on Consumer Credit (LCC) of 23 March 2001  [ archive ] (State Nov. 7, 2017)
  5. ↑ Fee for personal loan in Switzerland: The prohibition of fees for the credit brokerage  [ archive ] (Status on November 7, 2017)

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