Trouble on the cards as MEPs find consumer proposal hard to credit

By Anna McLauchlin

Date: 04/11/04

THE European Commission has set itself on a collision course with the European Parliament by refusing to scrap demands for "maximum harmonization" in an EU-wide law on consumer credit.

MEPs voted for various amendments to the consumer credit directive at first reading in April.

But the Commission has taken only some of the Parliament's objections on board in its revised proposal, just published.

The revised draft still imposes "maximum harmonization" of EU rules on credit to consumers, meaning that member states would not be allowed to modify rules or pass new ones at national level.

MEPs voted to scrap this requirement back in April as they claimed it would be too limiting for member states.

But the Commission says its dilution would "deprive consumers of all the advantages an EU-wide market for credit would offer them".

German Christian Democrat Joachim Wuermeling, the MEP in charge of Parliament's text, said that the Commission would have a fight on its hands.

"All the political groups are against full harmonization as it does not allow member states to uphold their own protection rules," he said.

"It's the key question of the whole directive and is important for the EU's overall consumer strategy. MEPs are not ready to give up on this," he warned.

Wuermeling added that he hoped incoming commissioner Markos Kyprianou would show a more "flexible stance" on the matter.

The European federation of consumers' associations BEUC backed his position.

"Consumer confidence will not be improved and the building of a single market for the benefit of consumers will rest on shaky foundations," the association said in a statement.

The Commission has incorporated certain amendments, including MEPs' request to exclude small loans of up to l300 from the proposal.

Loans above l100,000 and credit agreements where the consumer has to repay within three months are also exempt.

The original plan to create national databases allowing credit companies access to consumers' spending habits has been scrapped and in its place the Commission text demands that all existing databases be accessible to all creditors. An outright ban on doorstep selling has been softened.

The new draft gives member states free rein to regulate credit intermediaries as they wish, rather than the original detailed rules that they would have had to implement.

There are still potential areas of disagreement. MEPs' demands that mortgages be entirely removed from the directive have only been partially endorsed by the Commission's text, which excludes property mortgages.

Car hire-purchase agreements will also come under the proposal, which MEPs argued would prevent people from buying a car after it has been leased.

And the Commission has retained its proposal to restrict security on unlimited loans to three years, which Wuermeling said would punish some sectors of society. "It's basically restricting credit for poor people," he complained. "We really get the impression with this proposal that the Commission thinks lending is bad."

National governments will now review the draft and the Commission hopes a decision will be reached in 2005 before it is finally approved in 2006. Coming under the co-decision procedure, the directive needs to be rubber-stamped by both national governments and the Parliament before it can become law.

In the revised proposal of the Consumer Credit Directive of 28 October 2004 the European Commission did not give up the demands for 'maximum harmonization' as requested by the European Parliament at its first reading in April 2004. Maximum harmonization implies that Member States would not be allowed to modify rules or pass new ones at national level.

• Primary Source

European Commission: COM(2004) 747 (Amended Proposal for a Consumer Credit Directive) http://ec.europa.eu/comm/consumers/cons_int/fina_serv/cons_directive/credit_cons_en.pdf

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