Mention must be made of the distinction between real rates and nominal rates.
The nominal rate is the percentage of interest that formally appears in the contract and which regulates the home loan operation. In reality, however, the effective cost of the loan is inevitably conditioned by a whole series of other factors: first of all, by various expense items (survey, review and closure expenses; collection or encashment expenses; third-party agency costs; tax and insurance expenses; other contractual expenses connected with the operation); furthermore, as was seen above, the cost varies according to the redemption plan agreed upon: more frequent instalments mean a higher effective rate.
As regards such costs, beginning on 1 October 2003, based on a decision by the Interministerial Banking Committee (C.I.C.R.), a new index, the I.S.C. (Summary Cost Indicator), was introduced which must be calculated according to the rules for the effective overall annual rate (T.A.E.G.) defined, in its turn, as "the total cost of credit payable by the consumer expressed as an annual percentage of the loan granted. The T.A.E.G. includes interest and all fees to be levied for the use of the credit".
Moreover, in implementing a recommendation by the European Commission of 1 March 2001, most Italian banks have signed up to a "Code of ethics for pre-contractual information relating to residential mortgages". Based on this code, the banks are obliged to provide customers, before stipulating a contract, with a standardized fact sheet (E.S.I.S.: European Standardized Information Sheet: that means that the content and order of the items on the sheet must be the same for all banks - throughout the European Community! - so as to allow for a better comparison of conditions) on which the T.A.E.G. must appear.
The same date of 1 October 2003 also saw the introduction of new national regulations on the transparency of banking operations and services. The effect of that regulation is that banks must make available to their customers an "information sheet" that must include the economic conditions of the operation and the contractual clauses that regulate it. The contents of the "information sheet" and the "E.S.I.S." may be harmonized.
The customer, then, has the right, before signing, to receive a complete copy of the text of the contract for a considered assessment of its content.
There must also be a "summary document" attached to the contract clearly pointing out to the customer the most significant contractual and economic conditions; this must also contain the I.S.C.