European Parliament proposes new online credit suitability rules

MEPs have proposed legislation designed to protect consumers online from credit card debt, overdrafts and loans that are unsuitable for their financial situation.

The proposed new rules would require that:

  • consumers are always provided with easy to understand standard information upfront which is sufficient to enable them to compare different offers, and understand the legal and financial consequences of loans and credit costs;
  • consumers are reminded of their right to withdraw from the credit agreement or the agreement for the provision of crowdfunding credit services without giving any reason within a period of 14 calendar days;
  • all credit advertising contains a clear and prominent warning that borrowing money costs money, and avoids inciting over-indebted consumers to seek credit or suggesting that credit is a means by which to acquire success or social achievement; and
  • lenders go further in assessing the creditworthiness of people taking out a loan before it is granted (including requiring information on a consumer’s current obligations or cost of living expenses).

MEPs also agreed that the EBA should develop guidelines detailing how creditors and providers of crowdfunding credit services perform this creditworthiness assessment.

MEPs proposals will now be discussed with the Council and Commission.

Duncan Scott