Consumer Credit regulations favour the buyer

The European Council has just approved the amendment voted by the European Parliament on the directive establishing common rules on consumer credit.

The directive aims to guarantee a high level of consumer protection and to harmonise certain aspects of the laws, regulations and administrative provisions of the Member States concerning consumer credit.

The new regulation will cover personal loans of between EUR 200 and 75.000 repayable after more than a month. It will not apply to mortgages or to deferred debit cards.

The EU hopes the plan will help consumers understand more precisely the terms and consequences of borrowing money. Lenders will be required to provide more information in a timely manner and disclose all facets of the terms.

The directive standardises the information to be given in advertising relating to loans.  The EU says the rules will enable the consumer to compare more easily the various offers on the European market.  It also obliges credit institutions to provide the consumer with exhaustive pre-contractual and contractual information using an approved form.  Before the conclusion of the credit contract, the creditor will have to verify the consumer's creditworthiness on the basis of information obtained from the consumer and, where necessary, on the basis of a consultation of appropriate databases accessible to all Member States (particularly in the case of cross-border credit).

The directive also allows for a Right of withdrawal and early repayment choices.  The consumer will have a period of fourteen calendar days in which to withdraw from a credit agreement without giving any reason.

It will be applicable from 2010.

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