By Anna McLauchlin - 15th March 2004
MEPs will vote to allow member states to uphold their current laws on consumer credit under an amended proposal on Tuesday.
An original proposal from the European Commission wanted to lay down pan-European law on consumers seeking credit, preventing member states adding to the new rules.
But MEPs judged that consumer friendly countries could have to restrict some of their laws as a result of the move.
For example, under current UK law if someone buys a car on credit which turns out to be faulty both the supplier and the creditor are jointly liable.
Under the commission's proposal consumers would have to pursue the supplier first and only if this approach fails would the creditor be liable.
MEPs therefore modified the proposal to allow governments to apply more ambitious laws if they have them.
"It's a lighter touch proposal than the one originally put forward by the commission", a source close to the negotiations told this website.
"It looks like (the amendments) should all go through fairly comfortably in the vote tomorrow".
Other amendments include the exclusion of any mortgage-related loans from the proposal.
The commission's draft included 'equity release' products, where mortgage holders unlock a part of their mortgage to pay for something else.
But MEPs supported industry concerns that including equity release would conflict with other EU laws on mortgage lending.
And parliament also wants to reduce the 'right of withdrawal' period, where a consumer has the right to withdraw his or her credit agreement without reason or penalty, to seven days from an original 14.
The directive will cover all types of credit from loans and overdrafts to hire-purchase and financial leases. It aims to ensure that customers can expect the same level of information on credit offers anywhere in the EU.
Both MEPs and EU governments must back the proposal if it is to become law.
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