One step forward towards a mortage credit directive

On Wednesday, the European Parliament gave broad support to the pending proposal for a Mortgage Credit Directive, which, if everything works according to plans, should come into force in the spring of 2014. 

While not all loan-seekers will be enthusiastic with this intervention, the directive is aimed at two quite important objectives:

1) facilitating the creation of a single market for mortgage loans;

2) preventing the recurrence of crises in the housing market such as the ones that hit fiercely Spain and Ireland over the last few years.

How should these objectives be achieved? 

First, and this is the part credit consumers might be worried about, the Directive introduces European standards for creditworthiness assessments: the effect of this on consumers is likely to vary according to the state where they live. At the same time, better information and decision-making are pursued by the introduction of a standard information sheet, which should make comparison easier, and a 7-day reflection period. 

The directive also foresees a general right to early repayment, which the member states might subject to the payment of a fair compensation to the credit provider. 

As concerns brokers and intermediaries, while the directive  imposes a set of rules of conduct (concerning inter alia pay structure and the obligation to provide prospective lenders with "worst-case-scenario" information) meant to prevent conflicts of interests and encourage "fair" lending practices, new chances will be provided by the introduction of a "pass-porting regime"- i.e. the chance of seeing one's trade authorization recognized in the whole Union. 

The directive also introduces "good practices" on the sensitive issue of arrays and foreclosures, encouraging banks to consider their debtor's position carefully before undertaking irreparable actions and asks states to make sure that incorporation of the asset takes place at "best effort" price. 

In addition, national rules of contract law might have to be adapted to provide parties the possibility to stipulate that "returning" the collateral- the house- will suffice to extinguish the debt. 

Why not make a New Year's Resolution to avoid a Christmas debt hangover next year?

What is the real power of New Year’s resolutions? This morning I started to carry out mine which have to do with more jogging. However, there is nothing fantastic about it, as New Year’s resolutions mostly have to do with goals aimed at improving one’s physical health. Nevertheless, the UK Office of Fair Trading(OFT) has recently set a more remarkable challenge for consumers by urging people to begin thinking now about saving for next Christmas, somehow aimed at improving consumer financial health.

Accordingly, the OFT is providing practical advice to people wishing to avoid the financial strain they may have faced this Christmas as part of its Save Xmas campaign. Top tips include: (1) plan early - be realistic about what you are going to need for next year and budget accordingly, (2) look at your options - find out about the pros and cons of post office, bank, building society and credit union savings schemes, as well as Christmas clubs, supermarket stamps and hamper schemes and(3)take action - choose the best option for you, and start putting some money aside. See more details at OFT website.

Despite prevention of over-indebtedness and consumer insolvency is a necessary approach in UK and any other Member State, not agreement has been reached on whether it should be encourage to treat consumption on the basis of earned income instead of expected income. See final report of the Group of Specialist for Legal Solutions to Debt Problems(CJ-S-DEBT) launched in 2006.