European review of Consumer Credit Legislation

The European Commission published a roadmap looking at reviewing the European Consumer Credit Directive.

The feedback period for the roadmap is open from today until 1 September 2020.

The review focuses on the following main problems:

  • inadequate scope – the emergence of new products have brought challenge and potentially inadequate consumer protection for products fall outside the scope of the CCD;
  • content and disclosure of information – due to the new ways products are taken out, it’s not always appropriate to include the lengthy information documents that the CCD requires.  These documents are also often complex for consumers to understand so may not enable consumers to easily compare offers and products;
  • insufficient safeguards to ensure responsible lending/borrowing – the CCD doesn’t stipulate how creditworthiness should be assessed and automated decision-making processes is also not covered; and
  • exceptional situations – the CCD does not contain provisions to protect lenders’ and borrowers’ interests in the event of exceptional and system economic disruption (such ass COVID-19).

The initiative is aimed at reinforcing, streamlining and modernising consumer credit rules to ensure they are future-proof, better protect consumers, deliver a level playing field and reduce unnecessary burdens for credit providers.

As part of the process, several policy options will be assessed:

  • baseline scenario – no policy changes – just a continuation of trying to raise providers’ and consumers’ awareness of their duties and rights;
  • non-legislative option – this would focus on non-regulatory measures to improve consumer information and creditworthiness assessments, together with enforcing current credit activities that is already covered by the CCD;
  • targeted legislative action – this would update the CCD to take account of identified issues such as extending it’s reach to unregulated credit;
  • comprehensive revision of the Directive – ensuring that all current issues are properly covered.

Emma Radmore