14 January 2008

Plenary Meeting 14-17 January

16 January 2008

EP adopts consumer credit directive

The European Parliament adopted at second reading the consumer credit directive. The amendments adopted should conclude the legislative procedure as they were negotiated with the Council in advance. The new legislation will cover consumer loans between €200 and €75 000 which has to be repaid within more then one month. 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 and will not cover the mortgage credits.

The directive lays down the standard information that must be mentioned in advertising containing financial information on a loan. MEPs chose to leave more room for manoeuvre than either the Commission or the Council proposed when it comes to the basic pre-contractual information which must be provided to the consumer using the standard European consumer Credit Information form. But the text adopted by European Parliament 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 new directive will give consumers the right to pay off loans early while also entitles the lender to ask a compensation for possible costs, fair and objectively justified, directly linked to early repayment of credit.

The directive defines the situations when the compensation cannot be claimed and allows Member countries to provide that the creditor may exceptionally claim a higher compensation.  

Such compensation may not exceed 1% of the amount of credit repaid early, if the period of time between the early repayment and the agreed termination of the credit agreement exceeds one year. If the period does not exceed one year, the compensation may not exceed 0.5% of the amount of credit repaid early.

A right of cancellation within 14 days will also apply EU-wide. But MEPs say that for linked credit agreements this period could be reduced to three days at the request of the customer.

The Directive must now be formally agreed by the Council. Member States have two years from the date of the entry into force for implementing this Directive. The Commission has to undertake every five years a review of the thresholds laid down in this Directive and its annexes and the percentages used to calculate the compensation payable in the event of early repayment.

Adopted texts 16 January

Commission background information

15 January 2008

Tax treatment of cross-border corporate losses

Parliament adopted an own initiative report, drawn up by Piia-Noora Kauppi (EPP, FI) in response to a Commission communication on the subject, stating that differing company tax regimes create obstacles to entering different national markets and the proper functioning of the internal market, distort competition and prevent the maintenance of a level playing field.

Parliament stresses that any measure for cross-border loss relief should be defined and implemented on the basis of a multilateral, common approach and coordinated action by Member States. This would only be an intermediate solution, say MEPs, pending the introduction of a Common Consolidated Corporate Tax Base, which would be a comprehensive long term solution for tax obstacles linked to the cross-border off-setting of profits and losses.

Action in favour of groups of companies doing business in several Member States should be a priority, as these often suffer different treatment from groups operating within one country, which in most Member States are effectively treated as a single entity. While extending domestic regimes is difficult where the tax bases differ, Parliament believes that as far as possible, corporate groups present in several Member States should be treated in the same way as those in a single Member. Particular attention needs to be given to the needs of small- and medium-sized enterprises. State

While avoiding double taxation, any solution would also need to prevent one loss being off-set twice and tax avoidance. The concept of what constitutes a ‘corporate group’ would also need to be carefully defined to avoid opportunistic distribution of profits and losses among Member States.

Text adopted

Commission Communication

© Graham Bishop