Consumer credit legislation in Central and Eastern Europe

Following the political changes of the late 1980s and early 1990s, the central and east European countries experienced the birth of a new economic environment. A new banking system has been set up and new market players have started to provide a wide range of financial services. Retail markets are becoming more attractive for financial service providers, and the central and east European countries have had to establish an adequate regulatory environment for this emerging and developing sector. At the same time, these countries have applied for EU membership, the basic criterion of which is compliance with European regulation. Different countries have used different methods to put their law in line with the relevant EU rules.

The central and east European countries will have to comply with consumer-related EU rules and establish policies in this context. Central and east regulators must make a policy choice: whether to follow a protectionist consumer policy or whether to support the development of free market access, with a satisfactory level of consumer protection. This is a policy decision, but compliance must be reached on the regulatory level: national rules must implement the EU consumer credit directives.

In general there were no common grounds of consumer credit regulation in the central and east European countries, as the legislative structures were highly divergent and there were no special rules for protecting consumer interests with regard to consumer credit. Therefore the existing European directives constituted the common basis for the candidate countries to establish a new regulatory framework. The European directives follow the principle of minimum harmonisation and leave a certain room for national specialities. In most of the candidate countries, the implementation of the European rules meant a higher level of regulation, and the new consumer credit laws are considered to be more developed than the previous rules.

Harmonisation can be achieved via one of two different approaches. In the first case, the candidate country adopts a separate piece of legislation that contains all the relevant EU-related consumer credit provisions. Most of the countries have followed this approach - Slovenia, the Slovak Republic, the Czech Republic, Latvia and Poland - although they often do a relatively strict implementation of EU directives. Estonia is special in this respect, because it has adopted altogether new legislation - the Estonian Obligations Act - that does not deal exclusively with consumer credit but addresses other more general issues as well.

The second approach is to keep the existing legislation that already deals with consumer credit-related issues, but to upgrade it such that it complies with EU requirements. This could result in a higher level of integration with existing national rules. Hungary and Lithuania follow this approach.

There have been already some attempts to assess the state of consumer credit regulation in the candidate countries. What distinguishes this study from these former assessments is that the present work is the first effort to give a comprehensive, country-by-country evaluation of the adopted consumer credit laws (except in the case of Bulgaria and Romania where this work is planned for a later stage).