The consultation covers, amongst other things, the advertising and marketing of credit products, the pre-contractual information provided, ways to assess product suitability and borrower creditworthiness, advice standards, responsible borrowing and issues relating to the framework for credit intermediaries (e.g. disclosure, registration, licensing and supervision).
Brussels wants to review rules governing "ways to assess product suitability and borrower creditworthiness". "The issue of suitability is one that may need to be addressed because some borrowers have been granted credit that was unsuitable for them or their needs," reads a document which the Commission has put under public consultation.
As for borrower creditworthiness, the EU executive is evaluating a range of measures aimed at avoiding risks of default. The US sub-prime mortgage crisis highlighted practices which have pushed lenders to give money away without properly assessing borrowers' ability to pay it back, and these need total redress, the Commission warned.
"For instance, a lender may opt to provide a risky loan because it can always resort to the sale of the property held as collateral in case the borrower defaults. It can transfer the risk of default to third parties by issuing residential mortgage-backed securities or even sell the loan portfolio," reads the document published by the Commission.
"Moreover, lenders and credit intermediaries may have incentives not to undertake a thorough creditworthiness assessment to speed up the process and thereby gain new clients," the document continues.
Borrowers themselves are expected to face more stringent controls on their credit histories. For this reason, Brussels is studying facilitating access to national credit data registers.
Better coordination among national authorities within the EU can make it easier to verify whether a mortgage buyer has borrowed significant sums in other countries. Assessment by lenders should thus be more appropriate, according to a report published by an expert group set up by the Commission in September 2008. The group did not propose the establishment of a single EU credit register, however.
Brussels is also looking into the advertising and marketing of credit products, pre-contractual information, credit intermediaries' activities and advice standards.
The Commission is inviting relevant stakeholders to make known their views by the end of August.