Proposal for a Directive on credit agreements for consumers

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Proposal for a Directive on credit agreements for
consumers

• Table of contents
• A. The history of the proposal and the state of
  play
• B. Objectives and scope of application of the
  proposal
• C. The main provisions of the proposal
• D. The new environment for the consumer credit
• E. Synergies with other Directives

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A. The history of the proposal and the state of
play

• 2002 a proposal was adopted by the Commission
  for a Directive of the Parliament and of the
  Council on harmonisation of the laws, regulations
  and administrative provisions of the Member
  States for credit for consumers.
• 2003 In the Council of 19 May 2003 a policy
  debate took place on a few major issues.
• 2004 The European Parliament adopted its 182
  amendments in first reading
• 2004 following the European Parliament 1st
  reading opinion, the Commission adopted its
  modified proposal

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A. The history of the proposal and the state of
play

• 2005 The Commission has published a second
  revised proposal. This new text is a consolidated
  version, based on the first modified proposal
  but including
  a number of significant changes further to
  consultations led in 2005 with the concerned
  stakeholders.
• May 2007 Political agreement by the Council
• September 2007 Common position adopted by the
  Council
• December 2007 Plenary of the European Parliament
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B. Objectives and scope of application of the
proposal

• Repealing of Directive 87/102/EEC on consumer
  credit
• Objectives of the Directive
• to establish a forward-looking Community
  legislation which is able to adapt to future
  forms of credit and which allows MS the
  appropriate degree of flexibility
• to offer sufficient degree of consumer
  protection and to ensure consumer confidence
• to create the optimum conditions for the free
  movement of credit offers for both those who
  offer credit and those who require it

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B. Objectives and scope of application of the
proposal

• Scope of application
• The Directive does not apply to mortgage credit
• The Directive does not apply to credit
  agreements involving a total amount of credit
  less than EUR 200 or more than EUR 100.000
• The Directive does apply partially to credit
  agreements in the form of an overdraft facility

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C. The main provisions of the proposal

• The proposal includes provisions on the following
  issues
• (a) Information to be provided by the creditor to
  the consumer with respect
• to advertising of credit agreements which
  indicate an interest rate or any figures relating
  to the cost of the credit to the consumer
• at a pre-contractual level (differentiation
  between classic credit agreements and credit
  agreements in the form of an overdraft facility)
• in the credit agreement (differentiation between
  classic credit agreements and credit agreements
  in the form of an overdraft facility)
• with respect to the borrowing rate

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C. The main provisions of the proposal

• (a) Differences with respect to the Directive
  87/102/EEC
• the establishment of the obligation of
  pre-contractual information
• differentiation of the information to be
  provided depending on whether it concerns classic
  credit agreements or credit agreements in the
  form of an overdraft facility
• the establishment of very detailed information
  requirements
• the establishment of standard information to be
  included in advertising and to be provided at
  pre-contractual level

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C. The main provisions of the proposal

• (b) The legislative intervention with respect to
  the regulation of certain contractual rights of
  the consumer
• right of withdrawal (period of 14 days) (this
  right is not regulated in Directive 87/102/EEC)
• linked credit agreements where the consumer has
  exercised a right of withdrawal concerning a
  contract for the supply of goods or services, he
  shall no longer be bound by a linked credit
  agreement

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C. The main provisions of the proposal

• (b) The legislative intervention with respect to
  the regulation of certain contractual rights of
  the consumer
• right of early repayment
• the consumer shall be entitled at any time
  discharge fully or partially his obligations
  under a credit agreement
• the creditor shall be entitled to compensation
  for possible costs directly linked to early
  repayment of credit provided that the early
  repayment falls within a period for which the
  borrowing rate is fixed under the conditions
  provided for by the Directive
• Different provision than those provided for in
  Directive 87/102/EEC

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C. The main provisions of the proposal

• (b) The legislative intervention with respect to
  the regulation of certain contractual rights of
  the consumer
• open-end credit agreements the consumer may
  effect standard termination of an open-end credit
  agreement free of charge at any time unless the
  parties have agreed on a period of notice, which
  may not exceed one month

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C. The main provisions of the proposal

• (c) Obligations of the creditor
• Obligation to assess the creditworthiness of the
  consumer
• Before the conclusion of the credit agreement,
  the creditor shall assess the consumers
  creditworthiness
• on the basis of sufficient information, where
  appropriate obtained from the consumer and,
• where necessary, on the basis of a consultation
  of the relevant database

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C. The main provisions of the proposal

• (c) Obligations of the creditor
• the creditor and, where applicable, the credit
  intermediary provide adequate explanations to the
  consumer in a position enabling him to assess
  whether the proposed credit agreement is adapted
  to his needs and to his financial situation
• where appropriate by explaining the
  pre-contractual information to be provided,
• the essential characteristics of the products
  proposed, and
• the specific effects they may have on the
  consumer, including the consequences of default
  in payment by the consumer

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C. The main provisions of the proposal

• (c) Obligations of the creditor
• MS may adapt the manner by which and the extent
  to which
• such assistance is given, and
• by whom
• to the particular circumstances of the situation
  in which the credit agreement is offered, the
  person to whom it is offered and the type of
  credit offered.

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C. The main provisions of the proposal

• (c) Obligations of the creditor
• if the credit agreement is rejected on the basis
  of consultation of a database, the creditor shall
  inform the consumer immediately and without
  charge of the result of such consultation and of
  the particulars of the database consulted, unless
  the provision of such information is prohibited
  by other Community legislation or is contrary to
  objectives of public policy or pubic security

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C. The main provisions of the proposal

• (d) Other issues
• detailed provisions on the calculation of the
  annual percentage rate of charge
• certain obligations of credit intermediaries
  vis-à-vis consumers
• out-of-court dispute resolution

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D. The new environment for the consumer credit

• standardised information requirements
• obligation to assess the creditworthiness of the
  consumer
• obligation to assist the consumer
• partial application of the principle of maximum
  harmonisation
• comitology procedure

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D. Synergies with other Directives

• The regulatory framework which applies to
  consumer credit includes also the following
  Directives
• Directive on advertising
• Directive 2002/65/EC on distance marketing of
  financial services
• Directive 2005/29/?C on unfair commercial
  practices