S.L. 371.21 Art. 13Conduct of business obligations when providing credit to consumers. Cap. 318. Cap. 318.

(1) When manufacturing and distributing equity release financial products falling within the scope of these regulations in accordance with regulation 3, or granting or providing advisory services on equity release financial products and, where appropriate, ancillary services to consumers or when executing an equity release financial product, the creditor shall act in accordance with the following principles:

Good faith, honesty and The creditor must conduct its business in (a) integrity good faith, with honesty and integrity. The creditor must conduct its business with Professionalism, skill,

(b) professionalism, due skill, care and dili-care and diligence gence. The creditor must take reasonable care to organise and control its affairs responsibly

(c) Management and control and effectively, with adequate risk manage-ment systems. The creditor must observe proper standards

(d) Market conduct of market conduct. The creditor must pay due regard to the Consumers' rights and

(e) rights and interests of its consumers and interests treat them fairly. The creditor must pay due regard to the Communications with information needs of its consumers, and (f) consumers communicate information to them in a way which is clear, fair and not misleading. The creditor must manage conflicts of interest fairly and reduce same to the lowest practical level, and, when they

(g) Conflicts of interest cannot be avoided, the creditor must dis-close them to the consumer and disclose the steps taken to mitigate them. The creditor must take reasonable care to ensure that the advice is suitable for the Consumers: relationships

(h) consumer who is entitled to rely upon its of trust judgment. Any suitability assessment car-ried out must be properly documented. The creditor must arrange adequate protec-

(i) Consumers' assets tion for consumers' assets when it is responsible for them. The creditor must deal with the competent authority in an open and cooperative way, Relations with the com- and must disclose to the competent author-(j) petent authority ity appropriately anything relating to the creditor of which the competent authority would reasonably expect notice.

Provided that in relation to the granting or provision of advisory services on credit and, where appropriate, of ancillary services, the activities shall be based on information about the consumer’s circumstances and any specific requirement made known by a consumer and on reasonable assumptions about risks to the consumer’s situation over the term of the credit agreement:

Provided further that in relation to such provision of advisory services, the activity shall in addition be based on the information required under regulation 18(3)(a).

(2) Creditors shall ensure that the manner in which their staff are remunerated does not impede compliance with the obligation to act in accordance with the obligation set out in sub-regulation (1).

(3) Creditors providing advisory services shall also ensure that the remuneration structure of the staff involved does not prejudice their ability to act in the consumer’s best interest and in particular is not contingent on sales targets./pp.

(4) In addition and without prejudice to the foregoing, creditors shall ensure that:

(a) All their actions promote public confidence in equity release as a potential retirement solution.

(b) Consumers shall have the right to live in their homes (the security for the equity release financial product) as their main residence throughout the term of the equity release financial product until the survivor (in case of joint borrowers) dies or moves into long-term care:

Provided that the creditor cannot commence proceedings, judicial or otherwise, for the sale or other transfer of the property securing the equity release financial product for a period of at least thirty six (36) months from the death of the consumer or his/her move to long-term:

Provided further that, in the case of a move into long-term care, the creditor and the consumer may agree to retain the equity release financial product even after the lapse of such thirty six month period, for so long as such agreement subsists, until the death of the consumer.

For the purposes of these regulations "moves into long term care" shall be evidenced by a written declaration of the management of the home for the aged where the consumer resides or is going to reside, stating that in the present circumstances, it is reasonable to believe that the consumer will be staying at the home for the aged and will not be returning to his/her main residence.

(c) Following the termination of the equity release financial product, for whatever reason, there shall be a period of at least thirty-six (36) months before which the creditor cannot commence proceedings, judicial or otherwise, for the sale or other transfer of the property securing the equity release financial product.

In the case of termination of the equity release financial product because the consumer has moved into long term care, the said period of thirty six (36) months shall start to run from the day the consumer moves into long term care.

In the case of termination of the equity release financial product because the consumer has died, if the consumer had not moved into long term care, the said period of thirty six (36) months shall start to run from the death of the consumer.

In the case of termination of the equity release financial product because the consumer has died, if the consumer had moved into long term care, the said period of thirty six (36) months shall start to run from the day the consumer moved into long term care.

In any case, the consumer or the heir/s of the deceased consumer, as applicable, shall be free to repay the equity release financial product in full against the release of the property securing the equity release financial product.

(d) Equity release financial products shall be provided only to consumers who have attained pension age, as defined in the Social Security Act and, in case of joint borrowers, both borrowers shall have attained pension age, as defined in the Social Security Act.

(e) The liability of the consumer under the equity release financial product at the termination of the equity release financial product, as estimated by the creditor at the commencement of the equity release financial product, shall not exceed sixty per cent (60%) of the value of the property securing the equity release financial product at the commencement of the equity release financial product, which valuation shall be procured by the creditor.

(f) The borrowing rate/s of the equity release financial product shall be fixed or capped for the whole duration of the equity release financial product.

(g) Consumers shall have the right to move to a main residence different from the main residence securing the equity release financial product without incurring any financial penalty by the creditor:

Provided that the new main residence to be granted as security shall be of the same value or more:

Provided further that the consumers shall bear any costs related to the constitution of security over the new main residence and cancellation of the security over the old main residence.

(h) Consumers shall be given a strong recommendation to seek independent professional advice in relation to the equity release financial product from a lawyer or accountant of the consumers’ choice, which lawyer or accountant is duly authorised to practice in Malta.

(i) Consumers have considered all alternative courses of action (such as selling current residence and moving to a smaller residence, or renting out part of current residence) that could deliver the consumer's objective without recourse to equity release financial products.

(j) Creditors shall assess the physical and mental health of the consumer in relation to the equity release financial product and in case of reasonable doubt, shall refer the consumer to the appropriate health specialist for proper certification.