EC Proposes Revisions to Consumer Credit Directive
EC is proposing revisions to the Consumer Credit Directive (2008/48/EC). The Directive has facilitated the establishment of a harmonized EU framework and provided a solid framework for fair access to credit for European consumers. However, since its entry into force in 2008, digitalization has profoundly changed the decision-making process and consumer habits. The proposed revisions aim to address these developments and provide that information related to credits must be presented in a clearly and adapted to digital devices so that consumers understand what they are signing up for. Furthermore, the proposed Directive will improve rules related to creditworthiness assessment process. The proposal will now be discussed by the European Council and Parliament.
The proposed Directive lays down a common framework for harmonization of certain aspects of the laws, regulations, and administrative provisions of the member states concerning consumer credits in the form of certain credit agreements for consumers and crowdfunding credit services for consumers. The proposal will repeal and replace the Directive 2008/48/EC. The factsheet, published along with the proposed directive, highlights that EC is revising the existing EU rules on consumer credit to:
- Include risky loans currently not in scope of the EU regulation on consumer credit
- Adapt information requirements to make sure they cater for digital devices
- Make information related to credit offers more clear and avoid information overload for consumers
- Address practices that exploit consumer behavior such as product tying, pre-ticked boxes or unsolicited credit sales
- Improve rules on the assessment of consumer creditworthiness—that is, their ability to repay the credit in a sustainable way, to make sure appropriate and proportionate data is used and to prevent over-indebtedness
- Cap the cost of the credit for consumers
- Support consumers who experience financial difficulties through forbearance measures and debt advice services
- Introduce requirements for businesses to put consumers’ needs first and act ethically while ensuring that their staff have an appropriate knowledge and competence on credit
Related Links
- Press Release
- Proposed Directive
- Factsheet
- Directive 2008/48/EC
- Overview of Rules on Consumer Credit
Keywords: Europe, EU, Banking, Credit Assessment, Consumer Credit, Loan Origination, Credit Risk, Lending, EC
Previous Article
NCUA Approves Rule on CECL Methodology Transition for Credit UnionsRelated Articles
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
APRA Penalizes Heritage Bank for Incorrect Reporting of Capital
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
OSFI Releases Annual Report 2021-2022
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
APRA Finalizes Capital Adequacy Standards for Banks
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
