In its Agenda for 2022, the Dutch Authority for the Financial Markets (AFM) identified responsible lending as one of its top priorities. The regulator believes it is important that household lending is properly managed. That means responsible mortgage lending — at the moment of lending as well as during the term of the loan. But this also means that consumers receive credit that is appropriate for their situation.
The AFM warns that, in 2022, it will assess whether consumer credit providers comply with the new lending standards and the prohibition on excessive borrowing. This is intended to ensure that consumers are indeed better protected. But how do you prevent over-indebtedness with consumer credit?
As a credit provider, you are required to guard against over-indebtedness. This is what is called an open standard, with the exact interpretation left to the credit providers themselves. The new lending standards that took effect on 1 April 2021 provide this interpretation. The lending standards have been drawn up by the Dutch Banking Association (NVB) and the Dutch Finance Houses’ Association (VFN) in consultation with the AFM and the National Institute for Family Finance Information (abbreviated as Nibud in Dutch).
Thanks to the tightening of lending standards, consumers’ financial situations can be even more precisely identified. For example, childcare, car and housing expenses are now included. We explain this further below.
While not all credit providers are affiliated with the NVB or VFN, they all must grant loans responsibly to prevent over-indebtedness. These loan providers are free to interpret how they do so in their own way, which may still result in a consumer receiving a loan from one lender but not from another.
The AFM considers the new lending standards to be a minimum interpretation of the open standard.
The lending standards apply to consumers (in other words, private individuals) who want to take out a loan of at least €1,000 and no more than €75,000. However, these lending standards do not apply to all types of loans. Examples of loans not included in the lending standards are home loans, student loans or loans with a term shorter than three months.
Credit providers use the lending standard to calculate how much someone may borrow without experiencing financial difficulties. The new lending standard is calculated as follows:
New lending standard = basic standard + mark-up percentage x (income – minimum income)
Basic standard
The basic standard is the minimum income a family must earn to be able to make ends meet. This basic standard is determined by Nibud and depends on the household composition. Another consideration is whether the applicant lives in an owner-occupied or rental home. The following basic standards have been in effect since 1 April 2021. No new standards have yet been determined for 2022.
| Single | Single with children | Couple | Couple with children | |
| Tenants | 1,071 | 1,732 | 1,562 | 2,030 |
| Homeowners | 1,181 | 1,842 | 1,673 | 2,140 |
| Income-related mark-up percentage | 15% | 12.5% | 12.5% | 10% |
Income-related mark-up percentage
Credit providers add an income-related mark-up percentage to the basic standard. They do this because when people earn more, they usually also have additional or higher expenses. So, the higher your income, the more money you need to have available to pay all your fixed expenses. These percentages can be found in the bottom line of the table.
Income
A consumer’s income is based on their net income (including holiday allowance) plus any supplements (such as a healthcare allowance, housing benefit, income-related child benefit, and/or an income-related combination tax credit), certain equity components (rental income or an annuity) and alimony (provided the duration is at least as long as the term of the loan).
Minimum income
The minimum income is determined each year by Nibud. In 2021, it was set at €1,523 per month.
Example: The applicant lives alone with their children in a rental home and has a net monthly income of €2,500. The new lending standard is then calculated as follows:
Lending standard = €1,732 + (12.5% x (€2,500 – €1,523)) = €1,854.13
This is the minimum amount the applicant must have available each month.
But credit providers must also look at a consumer’s fixed expenses in addition to the lending standard. Does the consumer own a home or car? Then you must add an extra amount to the basic standard. Here, too, the addition depends on income and household composition. The amounts are included in the addendum on lending standards for consumer credit. In addition, do not forget childcare costs, student debt and any other loans. You must identify these costs and include them when determining the maximum loan amount.
