Specific provisions are also provided under the Consumer Credit Act. The granting of a loan is contingent on the borrower`s ability to repay credit maturities without notice. In order to achieve this, financial institutions are required to take into account the creditworthiness of the borrower. In addition, home loans granted by a financial institution should not exceed the threshold of 60% of the overall debt ratio under the total debt ratio. Home loans above the 60% threshold of the overall debt ratio should only be granted on an exceptional basis (or except under the total debt ratio) and financial institutions should provide clear documentation on the basis of the granting of real estate loans exceeding the 60% threshold of the overall debt ratio. As a result of the violation of the “Financial Services Prohibition” section of the Regulation Act, lenders also face a vote of no confidence in announcing enforcement actions that cause serious reputational damage, and the credit agreement may also be considered unenforceable. State attrition laws, which can apply to both federal and state-chartered banks, limit the interest rates banks can charge for consumer and commercial credit. Housing loans are loans that are only granted to consumers for the purpose of acquiring housing. Mortgage loans are generally granted on the basis of banking law and can be granted to any party (provided the conditions set by the banking law are met). However, a mortgage remains considered a residential loan when it is made available to consumers for the purchase of residential real estate.
Loans to individuals and/or legal entities within the scope of the National Credit Act (due to their annual turnover and assets) are subject to increased regulatory control, as the information to be provided to these borrowers before their creditworthiness is more important. Agreements must also follow a prescribed format and contain certain mandatory information. Under these conditions, it is difficult for lenders to ensure that a borrower is not over-indebted because of the credit provided by the lender to that borrower. A court may declare a contract that does not comply with the prescribed format illegal, so a lender cannot enforce its rights. Mortgage and consumer credit are subject to a number of regulatory requirements that do not apply to unregulated loans.