Since 2002 the European Commission has considered that the current Consumer Credit Directive (Directive 87/102/EEC), adopted in 1987, is in need of updating and reform. Official statistics reveal that there has been little growth in cross border transactions among EU Member States and that significant barriers remain. Consequently, these barriers should be removed in order to develop consumer and business confidence, and to facilitate access to single market opportunities in this area.
As a matter of fact, by 2004, the European Parliament had adopted its first reading position. Since then, the European Commission has accepted a number of the EP’s amendments and adopted its amended proposal in October 2004. It was then adopted by the Parliament and the Council of Ministers in April 2008. The EU is thus becoming more committed to creating business opportunities and enhancing consumer protection and choice, which, so far, the existing Consumer Credit Directive has not done in an effective manner.
New proposals were presented for a Directive on the harmonisation of the laws, regulations and administrative provisions concerning credit for consumers to create a more competitive, dynamic single consumer credit market which encourages entrepreneurship and growth. Yet, despite all these efforts, Member States take time to reach agreement, and discussions have dragged on for years with numerous counter proposals being presented.
The new Directive promotes consumer autonomy by enabling consumers to take informed decisions. It intends to regulate all consumer credit agreements up to a ceiling of €75,000. It imposes duties on the creditor and credit intermediaries to inform. The information should be included in advertising (such as figures relating to the cost of credit) as well as other information to be included in the credit agreements. Moreover, by using Standard European Consumer Credit Information, the Directive regulates the form in which specific information must be passed on to consumers in the pre-contractual stage.
Other provisions include obligations on creditors to assess a consumer’s creditworthiness, the right of consumers to a period of 14 calendar days in which to withdraw from the credit agreement without giving any reason, and that consumers are to be entitled at any time to discharge fully or partially their obligations under a credit agreement. Many financial institutions see this proposal as a threat to the development and expansion of their business, as well as interference in the way they operate. Consumers, on the other hand, have welcomed the proposal but remain sceptical about the effect on the level of consumer protection that will be achieved.
Member States are currently in the transition period to transpose the Directive into national law. This will take place in Malta in the coming months. A briefing and consultation session on the draft Legal Notice (the legal instrument that will transpose the Directive into national legislation), was organised by MEUSAC in collaboration with the Consumer and Competition Division (CCD) on Friday 9 April. Stakeholders from industry, consumer bodies, regulators as well as the general public are welcome to send their feedback on the draft Legal Notice which may be found on the CCD website http://finance.gov.mt/page.aspx?site=CCD&page=default. This may be sent to the Consumer and Competition Division by noon of Friday 7 May 2010.
Ms Azzopardi is Research Analyst at the Malta-EU Steering and Action Committee (MEUSAC)