Commission seeks to reopen mortgage code of conduct talks

Date: 20/05/1999

By Renée Cordes

The European Commission plans to invite banking and consumer groups to reopen talks on an industry-wide code of conduct aimed at ensuring that potential borrowers are given enough information to choose the best deal.

Talks between groups representing the financial services industry and consumer organisations, which began in 1997, broke down earlier this year amid disagreements over key details of the proposed accord, such as precisely what information lending institutions should be required to give potential borrowers.

Consumer groups and some smaller savings banks are resisting moves by Europe's mortgage banks to introduce a code under which lenders would agree to provide borrowers with easy-to-read fact sheets giving details of the conditions attached to their mortgage offer.

Although the code would be voluntary, the most recent proposal envisaged the Commission assuming a supervisory role and monitoring whether it was being properly implemented.

The Commission warned before the last round of talks that it would consider drafting proposals for new EU legislation if the parties failed to reach an accord. But it urged the groups involved to continue talking to each other.

A Commission official said the institution would invite the parties to fresh talks within the next few weeks to see whether there was any scope for brokering a compromise. "We think that if you try to do this in a different way, there is a chance for things to move forward," he said.

EU consumer group BEUC has so far opposed the industry's attempts to introduce a voluntary code, arguing that banks should be required by law to give consumers enough information to make informed choices. The organisation has repeatedly called on the Commission to propose legislation to extend the scope of an existing EU directive on consumer credit, agreed in 1997.

The move to develop a code comes amid a surge in lending activity across the EU, spurred by record low mortgage interest rates. Gross mortgage lending soared by more than 60% in Denmark and Portugal in the first nine months of last year, and this trend is expected to continue.