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Consumer credit agreements

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Consumer credit agreements

The development of the credit market within the European Union must be accompanied by reinforced consumer rights. Harmonisation of national provisions must also allow cross-border credit to be promoted.

ACT

Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC

SUMMARY

The development of the credit market within the European Union must be accompanied by reinforced consumer rights. Harmonisation of national provisions must also allow cross-border credit to be promoted.

WHAT IS THE AIM OF THIS DIRECTIVE?

The directive harmonises legislative, regulatory and administrative provisions of European Union countries on matters of credit granted to consumers borrowing to finance purchases of goods and services (holidays, goods, new car, etc.) It will open up the European consumer loan market, whilst improving the transparency of contract terms and the level of consumer protection.

However, this directive is not applicable to credit agreements:

guaranteed by a mortgage which are regulated by Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property;

signed in order to acquire land or property, these being governed by Directive 2014/17/EU;

of which the total amount is less than EUR 200 or greater than EUR 75,000. By 21 March 2016 at the latest (date by which the Directive 2014/17/EU must be transposed), the directive must be applied to non-guaranteed credit agreements intended to allow for the renovation of residential immovable property, for an amount greater than EUR 75,000.

KEY ASPECTS

When advertising for credit contains aspects relating to the cost of this credit (for example, the interest rate), the advertising must provide standard information based on a representative example, containing, amongst other things:

the rate of interest and cost details;

the credit amount;

the annual percentage rate (APR) which represents, in the form of a percentage, all mandatory costs in order to obtain the credit (loan interest rate, administration fee, obligatory insurance premiums, guarantee fees).

During the pre-contractual phase, the lender must provide understandable information on the essential features of the credit offered in reasonable time. This includes, amongst other things:

the duration of the credit agreement;

the total credit amount;

the borrowing rate and terms applicable to this rate;

the annual percentage rate and the total amount due by the consumer;

the amount, number and frequency of payments;

fees related to or resulting from the agreement;

consequences of late payment and non-performance.

Consumers should receive information in a standardised format.

The credit agreement must also contain similar information in a similar format.

Lenders must:

provide adequate explanations to consumers, to ensure that the latter can choose an agreement which corresponds to their needs and financial situation;

assess the solvency of their customers before signing an agreement, whilst respecting the consumers’ right to be informed when their credit application is rejected after consulting a credit database.

Consumers:

have 14 days in which to withdraw from the agreement, without having to state a reason;

have the right to make early repayment of their credit at any time, provided that the creditor receives fair and objectively justified compensation.

FROM WHEN DOES THE DIRECTIVE APPLY?

The directive came into force on 11 June 2008 and had to be transposed by 11 June 2010 at the latest.

Additional information is available on the European Commission website, on the page dedicated to consumer rights.

See also additional information on the consumer credit directive as well as other questions related to the directive and its implementation.

REFERENCES

Act

Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2008/48/EC

11.6.2008

11.6.2010

OJ L 133, 22.5.2008, pp. 66-92

Amending act(s)

Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2014/17/EU

20.3.2014

21.3.2016

OJ L 60, 28.2.2014, pp. 34-85

Last updated: 05.01.2015

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