Consumer Credit: European Commission adopts proposal for new Directive, September 2002

The European Commission adopted a proposal for a new Directive on consumer credit on 11 September 2002 aimed at bringing 1987 EU wide rules up to date so that they cover modern forms of consumer credit available in the 21st Century.

Over the last decade, these EU rules have largely been overtaken by national regulation which has led to reduced cross-border transactions and differences in consumer protection in the Member States. The issue has been a key item on the agenda for the Directorate General for the Internal Market and European citizens have also been keen to benefit from a new European consumer credit Directive which would enable them to compare offers from all over Europe. In a opinion poll (Eurobarometer 56) carried out in 2001 over half of those interviewed considered consumer protection as a matter for full harmonisation throughout the EU.

Speaking about the proposal European Commissioner for Health and Consumer Protection, David Byrne, said:

'A new consumer credit Directive has long been on the to-do list of actions for building the Internal Market in financial services and improving opportunities for e-commerce. The rules are comprehensive and common to all. They are crucial to building an internal market in consumer credit. People need to know exactly what they are paying for credit and to be able to compare offers from all over Europe. Only then will they have the confidence to use the opportunities the Internal Market offers for cheaper cross-border borrowing, including through e-commerce.'

The proposal follows a large scale consultation of Member States and stakeholders which helped to identify guidelines for the revision. These include the inclusion of credit intermediaries, the introduction of a structured information framework for the credit grantor and more equitable sharing of responsibilities between the consumer and the professional.

The main elements of the new proposal are:

• Harmonised rules explicitly preventing the Member States from adding to the new rules unless specifically stated.

• An enlargement of the scope of the Directive to cover all forms of consumer credit whatever the form, amount, any surety or insurance.

• Improved transparency and comparability of credit offers

• The right for consumers to withdraw within 14 days without any justification

• Protection of personal guarantors and of consumers not fulfilling their contractual obligations

The European Consumers Organisation, BEUC, has reacted cautiously to the proposal. While it welcomed the European Commission's intention to improve consumer protection in the area of consumer credit, it criticised the harmonisation rules which it believes will prevent Member States from offering better protection to their consumers if they so wish. Jim Murray, the Director of BEUC, said:

'This proposal undoubtedly contains positive elements and is an incentive for the banking sector not to indulge in providing consumer credit without assessing the capacity of consumers to pay back loans. We fear that maximum harmonisation may actually reduce the level of protection currently available in at least some Member States'.

The proposal will now be subject to approval by the European Parliament and the Council.

Links:

European Commission:

• 11.09.02: Consumer credit rules for the 21st Century [IP/02/1289]
• DG Press and Communication: SCADPLUS: Consumer credit
• Revising and updating the Consumer Credit Directive
• Proposal for a Directive on the harmonisation of the laws, regulations and administrative provisions of the Member States concerning credit for consumers [COM(2002)443 final]

European Credit Research Institute:

• European Credit Research Institute: Consumer credit in the European Union [ECRI Research Report No. 1]

European Sources Online:

• The Consumer Policy of the European Union

Helen Bower
Compiled: Thursday, 12 September 2002

Background and reporting on the week's main stories in the European Union and the wider Europe.