The Competitive Council reached, by qualified majority, a political agreement on the Commission's modified proposal for a directive on credit agreements for consumers. The Council will adopt its common position at one of its forthcoming meetings after finalisation of the text and forward it to the European Parliament for a second reading in the framework of the co-decision procedure. The discussion in the Council mainly focused on article 15 of the compromise text which deals with the issue of early repayments.

Delegations of the Netherlands and Greece voted against the compromise text, Belgium and Luxembourg abstained.

The key features of the Council's agreement are:

Pre-contractual and contractual information
One of the key concerns of the draft Directive is that consumers are able to make, on the basis of pre-contractual and contractual information, an informed decision regarding the conclusion of a credit agreement. The compromise solution lies in improved structuring of the pre-contractual and contractual information. As regards pre-contractual information, it should be provided on a standard form in all EU Member States. This standardisation would make it easier for consumers to compare different offers.

Right of withdrawal
As a general principle, the consumer will have a period of fourteen calendar days to withdraw from the credit agreement without giving any reason. The text further specifies the conditions for using this right. The Council has introduced a new provision in order to clarify the relationship of this right to other Directives.

Early repayment
The Council's compromise text grants creditors a limited right to compensation for early repayment of the credit (0.5 % or 1 % of the amount of credit repaid early). This compensation should, however, apply only for fixed interest rate credits and, where the reference interest rate is lower at the time of the early repayment than at the time of conclusion of the credit agreement. The reference interest rate is now defined in the compromise text as the interest rate that the European Central Bank or the central banks of the Member States apply to their most recent main refinancing operation.
Furthermore, Member States will have the right to provide that the compensation for the early repayment can be claimed by the creditor only on the condition that the amount of repayment within 12 months exceeds a threshold defined by Member States. When fixing the threshold, which should not be higher than EUR 10,000 Member States will take into account, for instance, the average amount of consumer credits in their market.

Indication of the annual percentage rate of charge in respect of overdrafts
In relation to overdrafts, a large number of delegations considered that the annual percentage rate of charge (APR) constitutes a significant tool for measuring the burden facing the consumer.
In Article 9 (contractual information) the creditors are now given the opportunity either of indicating the borrowing rate and the charges or of indicating the annual percentage rate of charge, or of indicating both. Articles 4 (advertising information) and 6 (pre- contractual information) require that both the borrowing rate plus charges and the annual percentage rate of charge (on the basis of the assumption that the duration of the overdraft is 7 days and 3 months respectively) are indicated.

Information to the Commission about national measures
In order to enhance the transparency and information to consumers and credit providers, a new article has been inserted. It provides for an obligation on the Member States to inform the Commission about national measures taken in case of making use of regulatory choices provided for in the draft Directive. The Commission would make such an information public.

Council Compromise (Finish amendment not included)
Council press release

Better Regulation/ Reduction of administrative burdens

The Council took note of a Presidency progress report on the Better Regulation agenda.

The Better Regulation agenda aims at improving the quality and form of the regulatory environment in order to strengthen the EU competitiveness. It currently covers simplification of legislative texts, reduction of administrative burdens and preparation and examination of impact assessments on most legislative proposals.

Since the last progress report in December 2006 and thanks to the impulse given by the German presidency in cooperation with the Commission, many positive developments have taken place. In particular, the adoption and launch at the Spring European Council 2007 of the Action Plan for reducing administrative burdens1 that includes the commitment to reduce the administrative burdens arising from EU legislation by 25% by 2012.

Progress report

NA