Consumer credit agreements (until 2026)

SUMMARY OF:

Directive 2008/48/EC on consumer credit agreements

WHAT IS THE AIM OF THE DIRECTIVE?

It harmonises European Union (EU) rules regarding credit granted to consumers who borrow to finance purchases of goods and services (holidays, goods, new cars, etc.).
It aims to open up the EU’s consumer loan market, whilst improving the transparency of contract terms and the level of consumer protection.
The directive was repealed by Directive (EU) 2023/2225 (see summary), although it will remain valid until 20 November 2026.

KEY POINTS

The directive does not apply 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;
to acquire land or property, which are also regulated by Directive 2014/17/EU;
of less than €200 or more than €75,000; however, by 21 March 2016 at the latest (the date by which Directive 2014/17/EU had to become law in EU Member States), the directive also had to be applied to non-guaranteed credit agreements of more than €75,000 for the renovation of residential immovable property.

Advertising of credit that includes aspects relating to the cost of this credit (e.g. the interest rate) 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, 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, etc.).

Pre-contractual phase

During the pre-contractual phase, the lender must provide understandable information on the essential features of the credit offered in good time before entering into the contract. 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 relating to or resulting from the agreement;
consequences of late payment and non-performance.

Consumers should receive information in a standardised format.

Regulation (EU) 2016/1011 amends Directive 2008/48/EC and requires the lender, during the pre-contractual phase to the consumer credit agreement, where the credit agreement references a benchmark, to provide the name of the referenced benchmark and of its administrator and the potential implications for the consumer.

Credit agreement contract

The credit agreement must also contain similar information in a similar format to that provided during the pre-contractual phase.

Lenders must:

provide adequate explanations to consumers so they can choose an agreement that meets their needs and financial situation;
assess their customers’ creditworthiness before signing an agreement, and inform the consumer, if their credit application is rejected, of the result and the details of the credit database used.

Consumers must:

have a 14-day period in which they can 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.

Repeal

The directive was repealed by Directive (EU) 2023/2225 as from 20 November 2026. The general aims of the new directive are to reduce any disadvantages to consumers taking out loans in a changing market, and to facilitate cross-border provision of consumer credit and the competitiveness of the internal market, in line with the original aim of the directive.

FROM WHEN DO THE RULES APPLY?

The directive had to be transposed into national law by 11 June 2010. These rules should apply from the same date.

BACKGROUND

For further information, see:

Consumer credits and loans (European Commission)
Consumer credit agreements – review of EU rules (European Commission).

MAIN DOCUMENT

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 (OJ L 133, 22.5.2008, pp. 66–92).

Successive amendments to Directive 2008/48/EC have been incorporated into the original document. This consolidated version is of documentary value only.