Friday, 17 August 2012

CARRP - not a fish, but: a credit agreement relating to residential property

As we are all waiting for the European institutions to come back from their holiday and pick up where they left unresolved consumer law matters, certain problems will have to wait longer than others. In September there was supposed to be a vote in the European Parliament on the European directive on credit agreements relating to residential property (CARRP), but the news agencies inform that the vote was delayed until December 10. (Vote on European mortgage regulation delayed for three months) The proposal for this Directive was issued by the European Commission in March of 2011. (Mortgages: better protection for European consumers) In the coming months the European institutions will have more time, therefore, to discuss the provisions of this draft Directive.

If you have not yet heard of the CARRP and its goals, you should know that the CARRP is supposed to regulate more strictly advertising of mortgage credit, making sure that consumers do not get false expectations regarding the cost of the credit or its availability. Moreover, it would strengthen the supervision and regulation over institutions issuing mortgage credit as well as credit intermediaries. Another goal of the CARRP is to improve the information that is being given to consumers on mortgage credits (e.g., by creating a credit database), as well as to personalise it (through a European Standardised Information Sheet - ESIS). Consumers should also benefit from a harmonised annual percentage rate of charge. 

Last month the European Banking Industry Committee (EBIC) gave its opinion on the draft. One of its criticism is that the draft suggests that the Directive shall not apply to credit agreements in the form of overdraft facilities only where the consumer agrees to be exempted from the provisions of the Directive. However, the already binding Consumer Credit Directive gives mandatory consumer protection in cases of overdraft facilities, which pursuant to EBIC should lead to the exclusion of such credit agreements from the scope of application of the CARRP as a rule. One of the positively assessed elements of the CARRP is the introduction of more (and more clear) rules on what explanations should be given by lenders to consumers.

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