Parliament passes disputed consumer credit directive[fr][de] 

The new rules voted by Parliament on 16 January are set to harmonise the €800 billion consumer credit market and open it up to EU-wide competition. The directive will apply to personal loans ranging from €200 to €75,000 but does not cover mortgages or charge cards.

The Council is now expected to adopt the legislation in the weeks to come.

Parliament and Council managed to settle the last remaining issue - rules concerning compensation to lenders when clients settle their debt early. According to the rules voted by MEPs:

• Compensation may not exceed 1% of the amount of debt that has been repaid early. 
• If debtors repay within a year before the sums are due, compensation is brought down 0.5%.
• However, member states have the possibility to make exceptions to these thresholds and allow compensations to exceed the 1% threshold in certain cases.

These provisions contrast with the earlier version drafted by Rapporteur Kurt Lechner (EPP-ED), which provided no cap in general and would have entitled the creditor to "fair and objectively justified" compensation, thus leaving more room for interpretation.

The directive also standardises information provided to consumers when signing contracts, making it easier to calculate and compare the total cost of loans by using an annual percentage rate of charge (APR) as a basis for calculation.

Similarly, it harmonises the lender's right to withdraw within 14 calendar days, which – according to the Commission – is a new feature in 14 of the 27 member states.

Moreover, the information given by the lender must allow the borrower to make a responsible decision and the lender must also assess the solvency of the borrower, even though the Commission underlined that fighting over-indebtedness was not one of the directive's primary aims.

Meglena Kuneva, EU Commissioner for consumer affairs, welcomed the adoption of the directive, calling it "a step in the right direction". "At the moment, trying to compare different credit offers across the European market is like trying to compare apples and pears," she said. "Standard, comparable information for all EU credit loans will make the market more transparent for business and consumers. This is good for business selling across borders and good for consumers who want to make informed choices."

Rapporteur Kurt Lechner (EPP-ED) said "the law as a whole is a positive outcome" but that there was "still room for improvement" regarding the scope of the directive and pre-contractual information requirements. He added that he was now sceptical and had "mixed views" regarding the effects of the directive.

"I believe that Socialists and Liberals have struck a decent compromise in the interests of the European consumer," said Evelyne Gebhardt, Socialist Group spokesperson on the Internal Market. "If it manages to conclude this dossier at the end of the arduous negotiations with the member states, the European Parliament will have chalked up a notable success. A positive outcome should then prompt the Commission to bring forward its long-awaited mortgage legislation," stressed Evelyne Gebhardt.

Liberal MEP and ALDE spokesperson on consumer credit Diana Wallis said: "At its best this directive could have the effect of stimulating Europe's credit market by enabling and promoting cross-border consumer lending and providing greater choice of products, whilst always maintaining the backdrop of harmonised consumer protection rules that give consumers the possibility to compare what is on offer and make informed decisions."

Green MEP Heide Rühle was more critical: "This directive promised so much to consumers but, based on today's vote in the European Parliament, the end result would be legislation that ensures neither a high level of consumer protection nor a sufficient degree of security for cross-border credit engagements."

Monique Goyens, Director General of the European Consumer Organisation BEUC, stated: "Even though the result is a long way from our initial demands, there have been some improvements, particularly in terms of the information which should be provided to consumers. However, we regret that all the efforts of the last five years have not led to a more ambitious solution to an issue which affects almost every household in Europe."

European consumer credit association Eurofinas said the consumer credit directive was a "missed opportunity". Its Director General Tanguy de Werve said: "From a single market perspective, the result is disappointing. We are still far away from the initial objective. This is at, at best, a step in the right direction."

The European Banking Federation (EBF) voiced similar concerns and said that the directive would introduce a "disproportionate overload of information and bureaucracy" while "not delivering the additional consumer choice".

Stephen Sklaroff, Director General of the Finance & Leasing Association (FLA) said: "We are pleased to see that the European Parliament has amended some of the directive's original proposals, which would have adversely affected our customers. But some concerns remain. We will work closely with the UK Government to ensure that these are addressed when the directive is implemented in the UK."