New Consumer Credit Directive – impact and requirements
- Compared to the current directive, the scope of the new Consumer Credit Directive will be expanded to also include:
- loans not exceeding EUR 200
- interest-free loans with no fees and credits to be repaid within 3 months, subject to insignificant fees only
- all overdrafts
- all leases
- credit agreements concluded through social lending platforms
- The new Consumer Credit Directive prohibits cross-selling, which means offering or selling credit agreements in a bundle with other separate financial products or services when the credit agreement is not available to the consumer separately. In contrast, the new Consumer Credit Directive permits the sale of a credit agreement in a bundle, where such credit agreement is available separately, but not necessarily on the same terms as the bundled credit agreement (known as the “cross-selling”).
- The new Consumer Credit Directive also provides for much more extensive principles of credit assessment. Lenders will be required to adopt credit scoring procedures, document and continue using such procedures. It should be allowed to make the credit available, as a matter of principle, only when the outcome of the credit scoring shows that it is likely that the obligations under the agreement will be met. It will be illegal to cancel or modify the agreement to the detriment of the consumer on the grounds that the credit scoring procedure was not properly executed.
- The new Consumer Credit Directive explicitly states that the lenders not being credit institutions must be subject to appropriate procedures for authorization to conduct business as well as registration and supervision mechanisms established by an independent competent authority.
- The draft new Consumer Credit Directive also introduces an obligation for Member States to impose upper limits on one or more of the following:
- interest rates applicable to community loan agreements or services
- APR
- total cost of credit incurred by the consumer.
- Member States will not be able to introduce additional upper limits other than those mentioned above. However, additional limit categories will be allowed for revolving credits.