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In Annexes I and II, the MCD sets out the information that creditors must include in the ESIS. This includes information about the interest rate and other costs, and specifically requires that, for a variable borrowing rate, the ESIS includes a warning that the variability could affect the actual level of the Annual Percentage Rate of Charge (APRC). The warning shall be accompanied by an illustrative example of the APRC. In addition, under the heading of "Amount of each instalment", the ESIS must include a statement indicating that the borrowing rate is variable and an illustration of a maximum instalment amount.
The MCD provides that in certain circumstances the two illustrative examples are to be calculated by creditors using a benchmark rate specified by the European Banking Authority (EBA). In order to fulfil this task, i.e. to calculate the illustrative example of the APRC and the illustrative instalment amount for the ESIS, the EBA has developed a draft formula with which creditors are to calculate the rate.
By producing a formula instead of a single rate, the EBA seeks to ensure that its rate is representative of national circumstances. The formula uses as input an underlying rate that is specific to each Member State, either the European Central Bank (ECB) rate for Eurozone countries or the Member State's central bank rate for non-Eurozone countries.
Comments to this consultation can be sent to the EBA by 20 November 2015.