Last week the new Directive (EU) 2023/2225 on consumer credits (new Directive) was published in the official journal. The new Directive comes 15 years after the current 2008/48/EC Directive (CCD) that has been only partially effective due to the wording of the CCD itself and the developments linked to digitalisation, the practical application and enforcement in Member States as well as from the fact that certain aspects of the consumer credit market are outside the scope of the current CCD. The new Directive follows the Proposal published at the end of June 2021. Most of the key major changes highlighted in our comment on the Proposal have stayed in the final text.
The new Directive is expected to bring major improvements
to consumers in the following areas:
·
Scope (Article 2)- the new CCD now includes very
small loans (no lower limit) and interest-free loans - so-called buy now pay
later products.
·
Better pre-contractual information - mode detailed
rules on information to be included in credit advertisements (Article 8) and
the introduction of general information (Article 9)
·
Introduces rules on advisory services (Article
16)
· Regulates common unfair practicing rules on
fair, clear, and not misleading communication in advertising and marketing
(Article 7), tying and bundling practices (Article 14)
·
Contains more detailed rules on creditworthiness
assessment (Article 18)
·
Introduces information rules on contract
modification (Article 22)
· Require Member States to introduce measures to
prevent the excessive charging of borrowing rates, the annual percentage rate
of charge, and total cost of credit (Article 31)
· Lays down professional standards in the ways
creditors treat consumers from manufacturing products to executing/performing contracts
(Conduct of business rules - Article 32) and requirements for knwoledge and competence for staff of creditors (Article 33)
· Requires Member States to support financial
education on responsible borrowing and debt management (Article 34)
·
Introduces European rules on arrears and forbearance
(Article 35)
·
Contains more detailed rules on credit intermediaries
(Article 37, 38)
·
Contains rules on competent authorities (Article
41).
New consumer rights:
One of the rationales for the adoption of the new
Directive was market developments in
digitalisation that were not foreseen at the time when the CCD was adopted. The
rapid technological developments registered since the adoption of CCD have
brought significant changes to the consumer credit market such as the emergence
of new products and the evolution of consumer behaviour and preferences
(Recital 4). The new Directive acknowledges these changes by various measures.
To this effect, the new Directive acknowledges that a durable medium can be a machine-readable
document (Recital 34), and introduces new consumer rights. When consumers are
presented with offers based on automated processing of personal data, consumers
have a right to be informed on this in a clear and comprehensible way (Article 13).
When the creditworthiness assessment involves the use of automated processing
of personal data, consumers now have the right to request and obtain human intervention
from the creditor that may include a clear and comprehensive explanation of the
assessment of creditworthiness with automated data processing and the review of
the credit application.
An area for further improvement:
The most controversial provision in negotiating the new Directive was Article 31 the price regulation measure of the new Directive. As the compromise solution, the current provision is fairly vague, talking about ‘measures’ on the Member State level, leaving room for Member States to determine the best price regulation technique for their circumstances, which may range from usury laws to direct cost caps by way of a percentage of the fixed figure (for more detailed comments on this provision see my paper here).
