Collapse of mortgage talks sparks regulation fears

Date: 28/01/1999

By Renée Cordes

THE European Commission is considering how to regulate the mortgage industry following the breakdown of talks between consumer and banking groups on a voluntary code.

Both sides decided to abandon efforts to reach a compromise late last week because of disagreements over key details of the proposed industry-wide accord.

Their failure to get a deal has fuelled concern among companies in the financial services sector that the Commission might draw up proposals for binding EU-wide laws. Hopes of a voluntary agreement had been high in the run-up to last week's meeting, with the Banking Federation of the European Union (FBE) claiming that a deal was in sight after two years of talks. But they were dashed by disputes over key aspects of the code, such as precisely what information companies should be required to give would-be borrowers.

The Commission had warned before the latest talks that it would consider drafting proposals for new EU legislation if the two sides failed to reach agreement.

"The dialogue has been put into the deep freeze," said one Commission official this week. "We will see if we can find our way out of this mess."

As the industry waits to see what the Commission eventually decides to do, some associations such as the European Savings Banks Group will continue to rely on their own voluntary codes of conduct.

Financial and consumer industry sources involved in the talks declined to comment on their failure to get a deal, citing a confidentiality agreement with the Commission.

Negotiations on a voluntary code began in 1997 after Internal Market Commissioner Mario Monti and Consumer Affairs Commissioner Emma Bonino called on the financial sector and consumer groups to discuss ways of ensuring that potential borrowers were given adequate information before taking out home loans.

The Commissioners argued that EU-wide rules were needed to enable consumers to take full advantage of the single market by comparing the cost of mortgages in one member state with those in another.

Commission is considering how to regulate the mortgage industry following the breakdown of talks between consumer and banking groups on a voluntary code.