Changes in the Austrian Law on Mortgages and Loans

Recent changes in the Austrian law on mortgages and loans have changed and modernized parts of the Austrian Civil Code and introduced an Austrian Consumer Credit law. The newly introduced regulations draw a distinction between mortgages and loans which fall under the Austrian Civil Code and those that are regulated according to the new Consumer Credit Law. With the exception of a few transition provisions, the new regulations enter into force as of 11. June 2010.

An overview of what is new in the Austrian Civil Code:

• Starting immediately, loan contracts are no longer so-called Realverträge (contracts first executed when the object is transferred (for example in a loan contract, the loan contract becomes valid first when the bank transfers the money for the loan)), but rather consensual contracts; execution of the contract occurs upon signing of the contract and not upon transfer of the loan amount;
  
• Austrian Civil Code distinguishes between “general mortgage law” and “special loan law”. “Special loan laws” contain provisions concerning money loans in return for payment (loan contracts)
  
• Immediately effective, mortgage contracts only apply to non-cash lending and money loans free of charge
  
• Normally a loan contract can be viewed as a mortgage contract concerning money concluded in return for payment; however the simple right to call (loan limits, current accounts) is also included.
  
• Concrete regulations have been introduced regarding the characterization of loans which have been concluded for a definite or indefinite time period.
  
• Loans concluded for an indefinite time period now have a one month term of notice

Consumer Credit Law

• The new Consumer Credit Law deals with loan contracts in which the loan provider is a company and the loan acquirer is a consumer.
  
• The new Consumer Credit law utilizes the terminology of the Consumer Protection Law for company and consumers when referring to loan provider and loan acquirer. For this reason, legal persons not active in the business world, such as companies in the founding stages qualify as consumers.
  
• In accordance with the new Consumer Credit Law, all loan contracts must be concluded in paper form or in another long-term data form (for example PDF) for all contractual parties; however, since this is not considered a form regulation, the legal dealings remain valid, even if this provision is violated;
  
• For the length of the loan, loan providers are also subjected to additional information requirements in relation to all loan contracts concluded as of 11. June 2010; the Consumer Credit Law also, principally, provides for an ongoing information obligation in paper form for all loans on overdraft, in addition, the obligation to provide information in paper form exists in other instances as well, for example, when the debit interest rate changes;
  
• Providing information in writing is insofar particularly relevant because not doing so can result in a releasing of the obligation to pay fees
  
• The new Consumer Credit Law grants loan acquirers several more rights; for example, they may demand, at any time and no cost, amortization schedules for fixed rate loans.