Brussels, 16/01/2008 (Agence Europe) - The will of the European Parliament to reach an agreement on the proposed directive aiming to harmonise the rules on consumer credit within the EU triumphed, on 16 January, over the reservations of the EPP-ED group which, on the day before, had been jeopardising the chances of adoption for the compromise so patiently negotiated with the Council (see the plenary debate in EUROPE 9580). In the end flexibility on compensation for banks or lending bodies in case of the early repayment of the loan by the consumer, finally convinced the EPP-ED group to give up its call for more favourable conditions for the banks. The fears of the French UMP members that Pandora's box could be opened up in case of a conciliation procedure played a decisive role in this about-turn on the part of the European centre-right, which allowed the compromise favoured by the ALDE and PES groups and the European Commission to be adopted. This step forward paves the way for an agreement at second reading on a directive which will help to create a genuine integrated market for consumer credit, giving consumers the means to benefit from competition and to make informed choices between various loan offers throughout the territory of the EU, thanks to clear, comprehensible and comparable information available to consumers in all Member States, before signing a contract. This will help to reduce prices and increase the share of cross-border transactions (currently minimal, standing at just 1%) on this market, which is worth 800 billion euros.
The text of the agreement covers all loans between 200 and 75,000 euros, with the exception of mortgages. It guarantees the consumer the right to be informed, before signing the contract, of the total amount of the loan, the repayment period, the Annual Percentage Rate of Charge (APR) calculated using a single method, and the right to a cooling-off period of 14 days, with no need to provide any justification or pay anything. In case of early repayment, the compensation which banks may charge must not exceed 1% of the loan (to prevent dissuading consumers wishing to change credit establishment), unless there are any national provisions to the contrary. Provisions are in place to oblige the loan organisation to check the creditworthiness of the consumer on the basis of sufficient information and, if necessary, by consulting databases, public or private, to which all overseas banks must have guaranteed access.
The rapporteur Kurt Lechner (EPP-ED, Germany) stated that the Parliament had made “most noteworthy improvements to the common position of the Council”. Amongst other things, he welcomed the simplification of requirements under the directive in terms of the harmonisation of various information in loan advertising material, and the improvement of provisions on early loan repayments, which “will allow the Member States to authorise banks to charge the consumer compensation of more than 1% of the loan”. However, he voiced his regret at the fact that the plenary had not agreed to give up on the obligatory nature of the pre-contractual information to be provided to the consumer (just giving the consumer a copy of the draft loan contract is ample, said Mr Lechner), and that the MEPs had refused to raise from 200 to 500 euros the lower limit for loans covered by the requirement for pre-contractual information under the directive. “These major changes met with the refusal of a majority of Communist, Socialist and Liberal MEPs, who preferred to stay with the requirements of the Council”, said Mr Lechner. He spoke out against an “excess of red tape”, which will mean that “in the future, all loan contracts will be obliged to contain warnings”.
The Greens/EFA are only partially satisfied. “Given that two out of every three Europeans use credit, the result of the vote is by and large positive for the majority of European consumers and, in particular, for countries whose national legislation does not protect consumers sufficiently”, said Pierre Jonckheer, the vice-president of the group. The Greens/EFA welcomed the “balanced system of pre-contractual and contractual information, which will allow consumers to make their choice without being submerged by confusing and pointless information”. They also welcome the specific provisions to fight over-indebtedness in full respect of European legislation on data protection. Whilst fully supporting the right of consumers to pay back their loan early and the limits on the level of compensation which credit organisations can charge, the Greens/EFA add that “the maximum harmonisation of legislation is not the best approach, because the rights and interests of consumers are, generally speaking, better protected by an approach of minimal harmonisation, allowing the Member States to keep in place or to adopt higher standards”. They spoke out against the fact that building renovation loans aiming to improve the environmental performance of buildings were not excluded from the scope of the directive, to come under mortgage legislation instead. Stressing that the compromise is “not the best for consumers”, the GUE/NGL added that it had supported it, “out of concern for our responsibility towards the citizens of the EU” and to avoid arrangements “in favour of the banks”. Meglena Kuneva, the Commissioner for Consumer Protection, welcomed the vote as an important first step to stimulating the cross-border market in retail financial services. (A.N.)