EU Rules: Up to 1% Penalty for Early Loan Repayment

A new European Union directive rules that the penalty tax for early repayment of a bank loan will be up to 1% of the sum.

The new EU directive must be implemented in the legislation of all member countries until May 2010.

The information about the changes has been presented by Krastyo Preslavski, assistant of Customers Right EU Commissioner, Meglena Kuneva.

The actual amount of the penalty tax will be determined by the credit loans institutions considering the time left for the whole loan to be repaid.

The directive also rules that the banks must give accurate and understandable information on the credit loans conditions, as well as not hiding taxes for different financial services.

“The new EU directive aims to protect customers' interest. However, the bank should receive fair compensation for loans that are repaid earlier”, Preslavski commented.

He cited a research which shows that most of the people who go to the bank make their decisions based on the information they receive there. This means that people trust the bank officers as they trust their general practitioners, Preslavski said.

According to him, currently, there is no united inner European market for financial services. The new directive will help customers to chose the best conditions not only in their country, but in Europe as a whole, he explained.