10 December 2007

IMCO Committee adopted Consumer Credit Directive

Some 236 amendments had been tabled. The political groups reached agreement before the vote on 10 compromise amendments covering some of these. The major changes adopted by the committee concern the scope of the directive, advertising, pre-contractual and contractual information, in particular for overdraft facilities and, in particular early repayment terms.
 
MEPs chose to leave more room for manoeuvre than either the Commission or the Council proposed when it comes to this basic information. Lenders will be expected to provide information on both the benefits and the drawbacks of the loan offer.
 
Harmonisation will go further as regards the information to accompany the signing of the contract. The text adopted by the Internal Market Committee is less strict than that in the Council's common position when it comes to contractual and pre-contractual information which lenders are obliged to provide to their customers in the case of overdrafts.
 
The information provided by the lender must enable the borrower to take a responsible decision. The lender must also assess the solvency of the consumer before concluding a contract. Databases accessible by banks should make it easier to meet this requirement. But if the banks refuses a loan on these grounds, the customer will have the right, according to Monday's vote, to see, without charge, the information in that database and where necessary correct any errors

 
With regard to early repayment, the new directive should not itself set a ceiling on the level of compensation, but this amount should not go beyond the interest charges the client would have paid had the term of the loan not been reduced.
 
A right of cancellation within 14 days will also apply EU-wide. But MEPs in the committee say that for linked credit agreements this period could be reduced to three days at the request of the customer.
 
 The new legislation will cover consumer loans between €200 and 50 000, the committee decided, as opposed to the Council's preferred upper limit of €100 000. It will only cover credit contracts, not guarantors and other aspects of credit agreement law. The directive will apply only to loan contracts on which interest is paid, and not products such as deferred payment cards (charge cards).

The text will be put to the vote at Parliament’s plenary session in January. Parliament and Council are expected to hold negotiations ahead of the vote in the hope of reaching a compromise. These talks will begin before the end of the current Portuguese presidency of the Council.

© Graham Bishop