Consumer credit: MEPs adopt new EU rules

SUMMARY

MEPs today adopted new rules aimed at stimulating the EU market in consumer credit. Two out of three Europeans use credit to buy furniture, a washing machine or a car. But the vast majority seek lending only in their own country. The new directive should make it easier for people to compare loan offers from lenders in any EU country.

Today's vote followed a series of negotiations between the European Parliament and the Council of Ministers (representing the EU's 27 Member State governments), given that both Parliament and Council have to agree the new rules before they can come into effect. Among the main aspects of the new rules, as voted today:

• Standard information on loan conditions will make it easier to calculate the total cost of a loan offered by various banks;
• A right to withdraw from a loan within 14 days will apply EU-wide;
• The Directive sets out the terms for lenders to seek compensation for early repayment of credit; it sets a ceiling for early repayment penalties and defines when compensation cannot be claimed. It also stipulates when a lender can, exceptionally, claim higher compensation;
• The new rules cover loans between a value of €200 and €75,000.

This was the 2nd reading in the European Parliament where each amendment adopted needed at least 393 votes (50% + 1). The text now passes to the Council of Ministers, which is expected to confirm today's vote at one its next meetings. The directive would then come into effect in two years' time.

For further details, see: http://www.europarl.europa.eu/news/expert/infopress_page/063-18342-014-01-02-911-20080111IPR18242-14-01-2008-2008-true/default_en.htm

Contact:

• Simon Duffin, Press Officer, EP UK Office, tel 07786 060531, simon.duffin@europarl.europa.eu
• Cezary Lewanowicz, Press Officer - Consumer Policy - tel 0032 498 98 3257, cezary.lewanowicz@europarl.europa.eu
• Richard Freedman, Press Officer - tel 0032 2 284 1448, richard.freedman@europarl.europa.eu
• For further details, see: http://www.europarl.europa.eu/news/expert/default_en.htm

DEBATE

Excerpts from Tuesday's debate (15 January 2008) in Strasbourg

Commissioner Kuneva: The vote in this House on Wednesday on the Consumer Credit Directive is a very important moment for Europe’s 500 million consumers. It will directly affect many people’s lives, and it is about two critically important issues. The first is about consumers being able to make better informed choices when they take out credit loans: to pay for a family wedding, a washing machine or a new car – the things of life.

Second, it is about consumers getting more choice and a more competitive market. It is also a very important vote for businesses, creating a single, simple framework of rules so banks and other creditors can do business more easily across borders.

Malcolm Harbour MEP (Conservative, West Midlands): Above all, we want a well-regulated market in which consumers feel confident in accessing that market and knowing that they will have the information but also the safeguards of being able to see clear contract terms. It is quite clear in financial services that good regulation encourages market activity, and that is what we have been seeking throughout this process. However, the problem we have had with this Directive is the fact that the consumer credit market across the European Union is at very different stages of development: many countries, like my own, already have well-developed regulation. The original idea of a maximum harmonisation would have meant that consumers in those countries would have been disadvantaged, and it has been trying to get that balance right that has occupied us.

Arlene McCarthy MEP (Labour, North West): I welcome the 14-day withdrawal right and the right to early repayment, which are good elements for engendering consumer confidence and encouraging them to look beyond their home market for credit offers. This is not just about opening the market, and the fact that we now have free movement of labour and people across 27 EU Member States gives this law new significance. For example, a Polish plumber working in France or Germany and borrowing from a credit institution there can now obviously compare the different offers on APR in the knowledge that he has the standard information enabling him to take the right decision.

Finally, I welcome the fact that the Commission, by exempting credit unions from this law, is not strangling small Community providers with red tape. I also welcome the Member State flexibility there is now. This has, for example, enabled a high level of protection to be maintained for consumers in the UK, which will now retain the right to joint and several liability for credit cards.

Diana Wallis MEP (Lib. Dem, Yorks & Humber): Credit is going to be a difficult issue for the foreseeable future, for both lenders and borrowers alike. As legislators confronted with that global backdrop, we need to do something. We need to stimulate the EU’s market in financial services, while on the other hand ensuring that our consumers make sensible and informed choices, and that all the information and the comparators are available to them in order to do so… This directive can help. It can help Europe’s market in financial services at a difficult time, and it can empower and assist our consumers in obtaining credit and doing so competitively.

Godfrey Bloom (UKIP, Yorks & Humber): Mr President, I wonder if I might perhaps offer a few words of wisdom here. I have spent most of my life in merchant banking, albeit not retail banking, and I have to say I do not regard it as the business of politicians to come between a consumer, or a lender, and a borrower. I would not dream of trying to regulate on this subject, with all my experience. I look down the list of people who actually serve on this committee and in this Parliament and I do not see a great deal of experience there, so it is a question of the blind leading the blind.

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