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The Federal Government is planning a change in the law concerning the credit check on real estate loans. The Federal Financial Supervisory Authority (BaFin) should, therefore, get greater powers for the prevention of real estate bubbles. The Verbraucherzentrale Bundesverband (vzbv) demands more protection for consumers and market stability.

In a public hearing yesterday, the Bundestag discussed the adjustment of the credit guideline for real estate loans. Amongst other things, the draft bill on the “Financial Supervision Act” provides for an extension of BaFin’s powers. The financial supervisory authority should be allowed to decide for itself who may conclude a specific loan with which income and at what term. According to the Consumer Center, this could water down the credit check and endanger consumers and the credit market.

“Credit institutions are not allowed to sell consumers mortgages that are likely to cause them difficulties. At the same time, mortgage lending must not jeopardize the stability of the market. A conscientious credit check should prevent both, “said Dorothea Mohn, head of the team Financial Market at vzbv.

Credit check serves to reduce risk

The credit report provides companies with the creditworthiness of a potential customer even before the contract is completed. Thus it is estimated whether the income covers the payment obligations or not.

The credit report thus prevents customers or service providers from getting into financial difficulties or making losses.

Since real estate loans are particularly high loan sums, the credit check is even more important for both parties.

EU law for the protection of consumers

The Federal Government also wants to provide banks with more legal certainty when granting loans, after more complaints have been received regarding spongy formulations.

“There can be no question of a credit crunch because of legal uncertainty,” says Mohn. This has not least shown the low return of consumer complaints. The wording of today’s standard allows for leeway that was not actually provided by EU law. However, the rule of law is simple: the contract and the loan would have to fit the borrower’s financial terms. “You have to be able to afford the installments over the entire term. This applies to everyone, including older borrowers, “says Mohn. “There is no age limit.”