Finance & Leasing Association22 April 2022
Discussions on the Consumer Credit Directive Mark III (if your starting point is the 1987 Directive!) are in full flow. The Commission published its proposal in June 2021. The text is now being scrutinised by MEPs (led by the Internal Market and Consumer Protection Committee (IMCO), which as its name suggests is more pro-consumer with input from the more industry-friendly Economic and Monetary Affairs Committee (ECON)) and EU Member States.
The general direction of travel is to remove exemptions, including loans below €200 and the bring within scope B2C leasing (under the 2008 Directive HP was technically outside scope but the UK Government elected to include it in the UK implementation).
The Commission’s text has nodded to the future by proposing a one side SECCO (an online version of the standard pre-contractual information). However the flaw is that is to be provided in addition to the six page SECCI. It also helpfully recognises the need to reduce the requirements for radio ads by proposing a lighter touch in line with the campaign led by Radiocentre here in the UK.
Some familiar issues remain – the proposal outlines a more detailed alternative to ‘in good time’ for pre-contractual information; in some Member States it’s regarded as one second after the sale has been made which could be construed as going against the spirit of what the Commission had in mind.
On creditworthiness assessment, the battleground is proportionality which curries more favour with the centre-right and indeed with Member States. The Greens and those on the left take a more prescriptive approach I suspect lenders in mainland Europe will find it more challenging to adapt their processes according to the size and type of loan wherever the EU ends up. The Commission makes clear that social media data should not be used to assess a borrower’s ability to repay. To reflect the challenges posed by the pandemic, the text outlines measures lenders must put in place as part of ‘adequate policies and procedures’ to exercise reasonable forbearance.
Perhaps most controversially, the Commission introduces an obligation on Member States to set caps on interest rates, the annual percentage rate of charge or the total cost of the credit. In practice this may make little difference as caps are commonplace in many jurisdictions but it does signify intent from Brussels for a real pan-European dimension to the consumer credit market.
The European Parliament’s position is being drafted by Katerina Konecná, a Czech Communist. 700 amendments to the Commission’s text have been tabled by her and her IMCO colleagues. Amongst her priorities are to ban personalised advertising and only permit reliable data to be used in the creditworthiness assessment. Other MEPs have tabled amendments to introduce a requirement on lenders to develop products that support the green transition and new measures on debt collection, for example to place a limit on how many times a lender can make contact with the borrower before it is regarded as excessive. It is foreseen that the Parliament will adopt its position before the Summer (an IMCO vote is scheduled for mid-May).
On the whole, national governments advocate a more pragmatic approach to the new framework, to include a lighter touch regime for loans below €200 and exclude B2C leasing. They would maintain the idea of a rate cap but reject giving Member States the right to introduce additional caps for revolving credit facilities. The Council is less advanced in its deliberations so it seems unlikely that agreement with the Parliament will be reached before late 2022 but the FLA will continue to watch with interest.
Published 22 Apr 2022
