EU finally agrees on consumer credit law

MEPs reached an informal agreement with national ministers in Strasbourg on Wednesday just minutes before a crucial vote on new consumer credit plans.

The compromise agreement was accepted by a large majority of 688 out of a total of 718 deputies during the parliamentary vote.

But parliament’s rapporteur on the directive, Kurt Lechner, said that he had “regrets” on a few points and was “not entirely satisfied” with the text.

"I have a mixed view about the amended text. I would criticise the parliament," said the German MEP.

"If parliament would have taken the risk we would have won one or two more points and would have got it through in conciliation."

The consumer credit directive, originally proposed by the commission in 2002 and just agreed on Wednesday on its second reading, aims to harmonise credit law across the 27-nation bloc to make it easier for consumers to take out loans in other countries, and to open up a market in cross-border trade for lenders.

Commissioner for consumer protection Meglena Kuneva welcomed parliament’s decision:

"At the moment trying to compare different credit offers across the European market is like trying to compare apples and pears.

"Standard, comparable information for all EU credit loans will make the market more transparent for business and consumers. This is a step in the right direction."

Senior EPP-ED deputy Malcolm Harbour said the directive was "workable".

"We would have liked less complexity and less bureaucracy," said the British MEP.

"But on balance, the deal we have made today is good for the consumer and for the economy."

The directive aims to bring national legislation into line on five main points: advertising, calculating the annual percentage rate of interest (APR), the right to withdraw from the agreement, early repayment and information received before and during the credit contract.

Lechner welcomed the rules on APR that make it calculated across the board and said that the conditions set out for early repayment indicated "progress".

But he added:

"There are still so many differences in contract law in different countries that we can’t have harmonisation as a whole. It’s not even a good idea to aspire to that."

Lechner wants to ensure more leeway for national legislators than is enshrined in the compromise agreement.

The sticking point that he and parliament had with the council was how much compensation should be paid to lenders if consumers repaid their loans early.

"Council’s common position was incredibly complex despite the simplicity of the question," the EPP-ED deputy said.

The outcome of the negotiations is that member states will be able to go beyond the 1 per cent threshold set for compensation if they wish.

Socialist MEP Arlene McCarthy, chair of the consumer protection committee, was positive about the outcome.

“Consumers will now be able to shop around and compare the best deals across the EU," she said.

"However, more choice must go hand in hand with consumer protection. We are also building in safeguards to ensure companies across Europe don't lend irresponsibly and to make sure consumers are aware of their capacity to repay debt."

The council must now formally agree on the directive, which will come into force 20 days after its publication. Member states will then have two years to bring its provisions into line with national law.

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