Borrowers need to know that their interlocutor is professional, has sufficient expertise and is adequately supervised.
During McCreevy’s opening speech on the hearing on responsible lending and borrowing, he remarked that action needs to be taken in these areas at EU level for the following reasons:
· Restoring consumer trust: borrowers need to be able to trust that they can make an informed decision based on the information they are given.
· Consultation on responsible lending: building on work already done. The European Commission has been looking at the whole area of lending for many years now. As far as consumer credit is concerned, the adoption of the Consumer Credit Directive last year was a turning point. It is now at the critical implementation phase in the Member States.
· Capital treatment for real estate lending: irresponsible lending does not just have an impact on individual borrowers and households; it also poses a much wider challenge to the financial system and to society as a whole.
· Foreign currency home loans: a particular concern because they have the potential to expose private households to foreign exchange risk to a dangerous extent. McCreevy believes that it is now appropriate to consider specific and penal capital requirements to discourage credit institutions - throughout the credit cycle - from granting excessive foreign currency loans to private households.
· Avoiding foreclosure: It is important that lenders have a responsible attitude to the management of their relationship with borrowers on an ongoing basis. Where mortgage lending is concerned, foreclosures should absolutely be the last resort because they may have a seriously detrimental impact on the living conditions of the affected people.
He concluded by saying that financial regulation is no substitute for financial education and neither is it a substitute for properly resourced supervisors and effective supervision.
© European Commission
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