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SECCI and ESIS. Two strange acronyms that protect us when we apply for a loan

28 February 2023

Knowledge is power: the more informed we are, the better and more well-advised our decisions. This is why we have information sheets, which are all those forms that banks are required by law to supply when we are purchasing banking and financial products and services.

Information sheets are intended for consumer protection, as a way of helping them understand exactly who the other contracting party is, as well as the terms, conditions and characteristics of the service they are being offered. They are, therefore, easy to read, clear and comprehensive; they explain the characteristics and costs of the product or service, thus allowing you to easily compare the many offers available on the market and make informed choices.

We will focus on two acronyms that everyone should know about when they decide to apply for a loan.

One essential form is the standard and personalized European information prospect, which is called the SECCI for consumer credit and ESIS for mortgages.

What does 'standard and personalized' mean?

'Standard' means it is written according to a model that is the same for all intermediaries, so that the information is reported in the same sequence: this makes it easier to compare the different offers on the market. 'Personalized' means that it is filled in with the information provided by the client and according to the current market conditions.

What is SECCI and what does it mean?

SECCI stands for Standard European Consumer Credit Information. In Italy it is known as IEBCC (Informazioni Europee di Base per il Credito ai Consumatori). It is the information sheet you should ask for and read if you are applying for consumer credit in Italy.

What is it for?

It makes accessing information easier for consumers who want to apply for a loan, by explaining all the contractual terms and conditions. The information provided allows consumers to compare the different offers available on the market and choose the one that best suits their needs.

Is it mandatory to provide the SECCI?

Yes, the credit provider must make it available to the customer free of charge before they sign the contract, without the customer being obliged to accept the proposal. Anyone who wishes to apply for a personal loan is entitled to receive the SECCI form, whether in hard copy or as a pdf, so they can weigh up their options in their own time. SECCI forms are available on the intermediaries' websites, in the case of online signed contracts.

Why must it be provided?

Because every consumer who applies for a loan has three fundamental rights that are reported in the SECCI form:

  • the right to make informed decisions, that is to receive a comprehensive overview of the pros and cons of choosing that particular credit institution;
  • the right to change their mind, that is the possibility, within 14 days of the date of signing the loan contract, to do so without having to provide an explanation;
  • the right to pay off their debt before the agreed deadline.

What information does it include?

There may be a standard version of the form, which contains all the relevant information for understanding and assessing a financing solution, and a personalized version, which details the conditions applied to the specific customer who decides to sign the contract. Within the predefined format, the form must specify the contractual conditions according to the characteristics and needs of the customer.

The SECCI has 5 sections:

Section I -> Identity and contact details of the credit provider or credit intermediary (name and legal address of the credit provider or intermediary);

Section II -> Key features of the credit product (type of contract, amount, drawdown conditions, duration of the credit agreement, instalments and their amounts, total amount due, required guarantees);

Section III -> Credit costs (the main indicator to look for is the APR);

Section IV -> Legal aspects (right of withdrawal, early repayment, results of any consumer database consultation, right to receive a copy of the contract, validity period for the offer);

Section V -> Additional information for distance marketing (general information about the credit institution, such as the language it uses, conditions relating to the right of withdrawal, and ways of submitting a complaint).

Can it be accompanied by other information sheets?

The form can have various attachments summarizing additional information about the services provided by the credit institution to customers. In any case, before concluding the contract and throughout the period during which the consumer can exercise the right of withdrawal, the credit provider is obliged to provide the consumer, free of charge, with complete clarifications regarding the essential characteristics of the financing, contractual conditions, obligations arising from the contract, and the consequences of any missed instalment payments.

And what if, at the time of signing the contract, it differs from what is outlined in the SECCI?

The consumer has the right not to be given contractual conditions that are less favourable than those advertised in the SECCI or in another information document.

What is the ESIS, and what does it mean?

ESIS stands for EUROPEAN STANDARDIZED INFORMATION SHEET.

The ESIS serves as an information sheet to be requested and read when applying for a mortgage, which is a kind of longer-term financing. It's like a SECCI form designed for those applying for a mortgage.

What is its purpose?

It allows the customer to compare different mortgage offers on the market, assess them and make an informed and conscious decision about entering into the contract. It is a fundamental tool for comparing different mortgage proposals and identifying the one that best suits their needs.

Is it mandatory to provide it?

Yes, it must be made available to the customer after they have provided the necessary information about their needs, financial situation, and preferences, and in any case before the customer is bound by a credit contract or an offer. The delivery is confirmed in writing or through another durable medium that indicates the date of delivery.

What information does it contain?

The ESIS includes the characteristics and technical details of the financing/loan:

  • the lending institution (the name of the credit institution providing the mortgage);
  • the credit intermediary (indication/details? of any intermediary);
  • key characteristics of the mortgage (amount, duration, type of mortgage, total amount to be repaid);
  • Interest rate and other costs (indication of the APR; comparing this information with other banks' PIES forms can help you understand which mortgage is currently less expensive);
  • Number of payments and payment frequency;
  • Amount of each instalment and mechanisms that can cause the interest rate to change (to be examined closely in the case of variable-rate mortgages, especially during periods of high uncertainty about future prices and interest rates);
  • Amortization plan (a schedule for repayment);
  • Additional obligations (indications of any restrictions on maintaining the offer's conditions);
  • Early repayment (indication of any costs in the event of partial or total early repayment of the mortgage);
  • Customer rights (e.g. the possibility to modify the mortgage duration or temporarily suspend payments, the 'cooling-off period' or the time granted to the customer to reflect before signing the contract);
  • Complaints (indications on how to contact the bank's Complaints Office for any customer dissatisfaction);
  • Non-compliance with the mortgage obligations (indications of consequences for the debtor if the customer has difficulty meeting the contract terms);
  • Additional information (indication of the customer's rights to receive a copy of the contractual text);
  • Supervisory authority (the Bank of Italy and the OAM - Organismo degli Agenti e Mediatori [Agents and Brokers Organization], if a credit Consultant is involved).

Can it be accompanied by other information sheets?

The credit provider or credit intermediary may provide any additional information in a separate document if necessary or desired.

When should it be provided?

The ESIS must be provided as soon as the consumer has given their information and, in any case, in a timely manner before the consumer has accepted the credit provider's binding offer, that is before the consumer is bound by the credit contract.

What if, at the time of signing the contract, it is different from what is outlined in the ESIS?

If what is written is not the same, it is not valid and cannot be claimed as such by the credit institution.

How long is the ESIS valid for?

There is no fixed validity period, but each credit institution chooses the maximum duration, which must be clearly indicated in writing in the ESIS, otherwise the document is not valid. The ESIS is binding for both the customer and the credit institution even years after its issuance.

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SECCI and ESIS may seem like complex documents, but it is essential to read them as they help you make informed borrowing decisions. Before signing a mortgage or loan, always request one of these two documents. Compare multiple offers, and after careful planning, make decisions that are consistent with your needs and what you can really afford.