The revolving credit that was really a loan
A lender markets a product called "FlexKrediet" to a 58-year-old client, Marc. The contract is drafted as an opening of credit (kredietopening) with a variable limit up to €25,000, an annual percentage rate of 9.4%, and a card. Marc actually needs to pay a €15,000 invoice for a new heating system, once, and repay over four years. The broker tells him FlexKrediet is "the same as a loan but more flexible" and that he can just draw €15,000 and set up a fixed monthly payment. The contract has no fixed term, no fixed instalment schedule, and the lender can adjust the limit. Marc signs, draws €15,000, and pays only the minimum each month. Three years later he still owes roughly €13,500.
1. Distinguish the two credit types at issue and explain why the classification matters for Marc.
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The two types are:
- Credit opening / revolving credit (kredietopening): a credit facility with a limit that the consumer can draw on repeatedly, repaid in flexible amounts; it typically has no fixed term or fixed instalment schedule and the limit may be adjustable.
- Consumer loan / instalment credit (lening op afbetaling): a sum is advanced once and repaid according to a fixed schedule over a fixed term.
Marc's need - a single €15,000 advance repaid over four years - matches an instalment loan. The classification matters because it drives:
- Cost transparency and the APR: the two products have different cost structures and the revolving product's flexibility can hide a much slower repayment path.
- Repayment discipline: with a fixed-schedule loan, the €15,000 would be substantially repaid after three years; with a revolving facility paying the minimum, Marc still owes about €13,500. The "flexibility" is precisely what kept his balance high.
- Contractual protections: fixed-term loans come with a defined amortisation plan, whereas revolving credit exposes the consumer to limit changes and open-ended debt.
Presenting a revolving facility as "the same as a loan but more flexible" for a one-off, fixed-purpose need is a suitability problem, not just a labelling quibble.
2. What conduct-of-business failures are visible here, and what should the broker have done differently?
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Visible failures:
- Suitability / needs assessment: the broker did not establish that a revolving facility with an adjustable limit suited a one-off €15,000 fixed-purpose need with a four-year repayment horizon. The product's core feature (revolving, flexible repayment) worked against Marc's stated goal.
- Misleading characterisation: describing it as "the same as a loan but more flexible" obscures the absence of a fixed term and fixed instalments and the risk of persistent debt.
- Cost and risk disclosure: Marc was not clearly shown that paying the minimum leaves a large balance after three years, nor the effect of a variable limit.
- Vulnerability: at 58 with a defined one-off need, the broker should have been alert to the risk of long-tail debt.
What the broker should have done:
- Document Marc's need (one-off €15,000, four-year horizon) and recommend an instalment loan with a fixed schedule and term, or explain why a revolving product was genuinely preferable.
- Show a side-by-side repayment illustration: fixed loan vs. minimum payments on the revolving facility.
- Explain the adjustable limit and the right to reduce it, and set the limit near the actual need rather than €25,000.
- Record the advice and the client's decision in the file.