Monday, 21 May 2007

EU Directive Threatens to Sweep Away Consumer Protection

Consumers could lose vital protections against irresponsible and high cost credit if proposals for a new Consumer Credit Directive are ratified by the European Council of Ministers today.
The proposed EU Directive aims to create a single €800 billion-a-year EU consumer loans market by allowing cross border selling of credit, including internet credit. However, no significant consumer protections have been built into the Directive, and consumers face the prospect of taking out loans with terms and conditions set by the courts in the home country of the lender.

The EU Directive, which has not been debated in national parliaments, fails to introduce a requirement that lenders behave ‘responsibly’ and there is no common agreement across Europe as to which cost elements should form part of the APR on a loan. Many European consumers, for example in France and Germany, could see existing protections such as national interest rate ceilings undermined, whilst in the UK our consumer credit licensing requirements – recently tightened by last year’s Consumer Credit Act – can be ignored by lenders operating from the new EU states.

Professor Reifner of the Hamburg based Institute for Financial Services (IFF) and Chair of the European Coalition for Responsible Credit called on the Council of Ministers to reject the Directive at Monday’s meeting and prepare the way for national Parliaments to debate the Directive openly.

“This Directive fundamentally undermines consumer protection in all EU countries by reducing it to the lowest common denominator. Protections built up through national legislation and years of court rulings are about to be swept aside in the name of the free market. What appals us most is that Ministers have failed to demonstrate even the basic courtesy of openly debating these proposals in their national Parliaments.”

Damon Gibbons, from UK debt campaign Debt on our Doorstep, commented:

“The Secretary of State for Trade & Industry should bring an urgent debate on these proposals to the House of Commons. Consumer awareness of these changes in the UK is next to nil, and there is no mandate for the Government to sign up to this proposal on Monday.”

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