§ 5-1. Duty to explain before you take out a loan

The Financial Contracts Act (Finansavtaleloven)·LOV-2020-12-18-146

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The text of the law (unofficial translation)

§ 5-1. Duty to explain

(1) In connection with the duty to provide guidance under § 3-1 third paragraph, the lender (kredittyter) shall, before the agreement is entered into, give a customer (kunde) who is a consumer (forbruker) sufficient and tailored explanations of
  1. the main features of the credit agreement (kredittavtale) offered
  2. the significance for the customer of any terms concerning additional services
  3. the consequences of the customer's default on the credit agreement.
(2) The lender shall, to a reasonable extent, make sure that the explanations given are sufficient for the customer to assess whether the credit agreement suits their needs and financial situation.
(3) The Government (Kongen) may by regulations (forskrift) lay down further rules on the duty to explain under the first and second paragraphs, on how the duty to explain is to be carried out, and on exceptions from the duty to explain.
Source: Lovdata — Finansavtaleloven (the Financial Contracts Act) § 5-1

What does this mean?

The lender must explain to the consumer what the credit agreement involves before it is entered into. This duty is linked to the duty to provide guidance in § 3-1 third paragraph. The explanation must cover the main features of the agreement, what additional services mean for the customer, and what happens in the event of default (that the customer does not fulfil the agreement). The lender must also, to a reasonable degree, check that the explanation enables the customer to assess whether the agreement suits their needs and financial situation. The Government may issue regulations on how the duty is to be carried out and on exceptions. This section opens Chapter 5 and is followed by the credit assessment (kredittvurdering) in § 5-2.

Related sections
All sections of the Financial Contracts Act →