Peers hit at EU move on consumer credit

The European Commission plans to replace the 1987 EU Directive on Consumer Credit, which lays down minimum standards of consumer protection that Member States are free to improve, as Britain has done.

The Commission’s stated objective is to promote an internal market in crossborder consumer credit by enabling lenders in one country to offer credit to consumers in another. The Commission sees the differences in national laws as the main obstacle to developing that market. To overcome this, Member States would not be allowed to have national laws that gave consumers either less or more
protection than was set by the new Directive.

Undoubtedly an internal market in consumer credit would offer consumers more choice. It would also present huge opportunities for British companies to make profits in other Member States, using the know-how gained in developing the largest and most sophisticated consumer credit market in Europe. But all our evidence shows that the focus on cross-border credit is misconceived, because
consumer credit suppliers cannot penetrate a market in a foreign country without setting up or acquiring an establishment there, as several have done.

Contrary to its own established policy, the Commission has not carried out any study to verify the basic assumption on which its proposals are based. Nor has enough work been done to assess their effects. That matters in the UK where already high standards of consumer protection have been reinforced by the new Consumer Credit Act. The Directive would force some of those standards to be reduced. UK consumers would suffer and the flexibility to change UK laws rapidly
through domestic regulation when needed would be lost.

What is more, some aspects of consumers’ rights could be governed by laws other than their own, without them knowing that another country’s laws would apply or being able to obtain local advice on those laws. At the same time, consumers’ organisations say the scope of the Directive is too limited. All in all, the drawbacks of the Commission’s present approach seem to outweigh any advantages so far as the UK is concerned.

United Kingdom: Parliament: House of Lords: European Union Committee: Report: Consumer Credit in the European Union: Harmonisation and Consumer Protection (Part I) http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeucom/210/210i.pdf

United Kingdom: Parliament: House of Lords: European Union Committee: Report: Consumer Credit in the European Union: Harmonisation and Consumer Protection (Part II) http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeucom/210/210ii.pdf

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