Debt – Photo by Nicola Barts on Pexels
(BRUSSELS) – MEPs reached a provisional deal with the EU Council Friday on a set of new measures to protect consumers from credit card debt, overdrafts and loans unsuitable for their financial situation.
The EU Council and Parliament reached provisional agreement Friday on a revised consumer credit directive, to modernise and enhance protection for European consumers applying for credit.
It promotes responsible and transparent practices by all players involved in consumer credit, for example by ensuring that credit information is presented in a clear and understandable way, and is adapted to digital devices.
“Consumers can easily apply for credit online but might not always be well-informed on the consequences of this application,” said Czech industry minister Jozef Síkela, for the EU presidency: “They need to be able to know what they sign up for and how much they eventually have to repay.”
The consumer credit directive will make sure that consumers can make an informed choice when applying for credit. Before signing a credit agreement, the lender must make sure that consumers have easy access to all necessary information and that they are informed about the total cost of the credit. On top of that, lenders must assess a consumer’s creditworthiness, where they should assess if someone is able to repay their credit.
These consumer credit rules will ensure that consumers are protected from irresponsible lending practices that could lead to over-indebtedness.
With an increased number of consumers applying for credit online, and in keeping with the trend of digitalisation, the new credit rules will also apply to certain risky loans that are excluded from the scope of the directive currently in force. This includes:
- loans below 200
- loans offered through crowd-lending platforms
- buy-now-pay-later products
The new rules improve the creditworthiness assessment rules, by which the creditor assesses whether a consumer is able to repay its loan. When a creditworthiness assessment is negative, a creditor cannot make the credit available to the lender. This will protect consumers from receiving credit that they are not able to repay.
The provisional agreement reached today is subject to approval by the Council and the European Parliament.
Further information, European Parliament
