Verbatim report of proceedings

Monday, 19 November 2012 - Strasbourg

24. Implementation of the Consumer Credit Directive (short presentation)

  President. − The next item is the report (A7-0343/2012) by Birgit Collin-Langen, on behalf of the Committee on the Internal Market and Consumer Protection, on the implementation of the Consumer Credit Directive [2012/2003(INI)].

  Birgit Collin-Langen, rapporteur. − (DE) Mr President, ladies and gentlemen, this report deals with implementation of the Consumer Credit Directive. Parliament adopted this in 2008 by an overwhelming majority, and it deals essentially with loans of EUR 200 to EUR 75 000. It has two basic objectives: firstly, simplification of Member States’ laws on consumer credit and, secondly, better and comparable information on credit, with the aim of guaranteeing a high level of consumer protection and strengthening the internal market in cross-border consumer credit.

The definitive harmonisation of some key aspects of credit law has significantly raised the level of consumer protection in Europe. However, there has been little increase in the cross-border take-up of consumer credit: less than 2 %, with 20 % of it done online. This may be because only very few financial institutions offer cross-border consumer credit and because the market as a whole has been in decline in recent years as a result of the financial crisis. Also, it seems that the lack of any personal relationship with the financial institution concerned, rather than legal considerations, has discouraged the take-up of cross-border consumer credit.

The transposition deadline of two years was a particular problem. The procedure is very complex and involved both national legislators and financial institutions. The time allowed was perhaps too short; in future, it would be preferable to set a three-year transposition deadline.

Some of the Directive’s provisions were substantively challenged. For example, the standard information sheet providing the consumer with precontractual information. The information sheet was criticised as too detailed, difficult to understand. Another example was calculation of the annual percentage rate of charge. The Commission has put forward guidelines on this, but they are not legally binding.

It would be desirable for the provisions on calculating the annual percentage rate of charge to be applied uniformly in all relevant EU legal instruments. Lastly, I should mention the period allowed for consumers to withdraw. The issue of when the withdrawal period starts to run was problematical.

The existence of problems in transposing the Directive was identified by the Commission in its 2011 review of 562 consumer credit websites (SWEEP). Summing up, one can say that the Directive is a significant factor in consumer protection in Europe. The Commission should now review the way the Directive has been transposed and urge the Member States to apply it correctly.

Stakeholders should then be given time to get used to the new rules and gain experience of the way they are applied. Thereafter a detailed assessment should be carried out of the legal and practical impact of the Directive and, on that basis, consideration given to what amendments, if any, are required.

Those were the main points of my report. A total of 29 amendments were tabled. At this point, may I thank the shadow rapporteur most warmly for the frank and, to my mind, very fair and open discussion we had on the amendments.

I was very grateful for more concrete detail on a number of aspects, also for new insights on, for example, foreign currency loans or exchange-rate fluctuations. We were not able to accept amendments which went beyond the scope of the Directive, thereby suggesting a revision of it, or which properly belonged in other areas – for example mortgage loans or the supervision of financial markets.

I am firmly convinced, however, that we need consistent parameters. If it is true that take-up of cross-border credit is less than 2 %, then I think it is a matter of urgency that we concentrate first on implementing the rules we already have, before we start thinking about new and different rules that go further still.

We should take time to gather experience. Only in this way can the banks learn what they need to do, only in this way can consumers see what they can trust. I am sure we shall then have a chance of improving on that 2 %.

Catch-the-eye procedure

  Monika Flašíková Beňová (S&D). – (SK) Mr President, although the Consumer Credit Directive currently in force has created a common European legal framework to protect consumers, some legal and practical obstacles have still to be overcome, which is demonstrated, in particular, by the lack of sufficient consumer information about opportunities for cross-border consumer credit and the rights of consumers when concluding such contracts.

However, adequate consumer protection practices in the credit sector play a significant role in ensuring financial stability. Improving the cross-border consumer credit market would also significantly boost the internal market. Financial institutions must be required to provide consumers with personalised, complete, easily understandable information regarding the risks involved in lending. This information should ideally be included in advertising of consumer credit agreements, in pre-contractual information and in the actual consumer credit agreements.

A high standard of consumer protection in this area is absolutely key to improving financial integration, increasing demand and supporting growth.

  Ildikó Gáll-Pelcz (PPE). – (HU) Mr President, when people want to take out a loan, they encounter the fact that the costs of the loan are higher than expected, since some important information has not been communicated to them or has not been communicated clearly. Indeed, a common, negative experience is that consumer credit conditions are often difficult to understand. This year, as the rapporteur has mentioned, an investigation at Union level reviewed numerous websites advertising consumer credit, for example 16 in my country, Hungary. Of these, 11 were found not to comply with the Union consumer-protection rules, but there is a much worse situation than that. For example, 93 were reviewed in Belgium, and there was a problem with 89 of them. I think this result is absolutely desperate. In my view, banks not only have a problem with credit construction but also with credit brokers, since it often emerges from the credit-broking companies themselves that they actually represent a consumer group and are therefore capable of misleading consumers. We have a double task: on the one hand, to represent consumers and, on the other, to regulate companies that engage in such misleading practices.

  Silvia-Adriana Ţicău (S&D). – (RO) Mr President, through its report on consumer credit, Parliament seeks a better level of consumer protection. We call for an obligation on financial institutions to provide consumers with personalised, complete and easily understandable explanations regarding the risks involved in foreign currency lending and the impact that interest rate increases on foreign currency loans have on the rates. These explanations must be provided before any contract is signed.

In the case of loans, we would stress the importance of the right to information about the cost of additional services, and consumers’ right to buy auxiliary services such as insurance from alternative suppliers. Prior to interest rate changes, notification to consumers should afford them enough time to survey the market and to change credit provider before the changes take effect.

  Franz Obermayr (NI). – (DE) Mr President, consumer credit is a special problem. This area of the market is booming. In 2010, EU citizens owed consumer credit debts amounting to EUR 600 billion. Therefore caution is advisable here. With a consumer loan, it is not the lowest monthly payments or the lowest interest rate that are the deciding factor, but the overall cost of the loan. In order for the consumer to judge whether a loan from his local bank is not cheaper, it is imperative that he knows the real interest rate, fees and the cost of compulsory default insurance. However, with online loans especially, this basic information is often not provided. This must be regulated at European level, because online loans are offered across borders. Moreover, consumers must be able to compare the many and varied products offered by financial providers properly.

  Elena Băsescu (PPE). – (RO) Mr President, I too commend this report, which aims to harmonise consumer protection and to improve competition. I agree that the cross-border market for consumer credit needs to be strengthened. This will promote the functioning of the internal market. At the same time, consumers need to be better informed and to benefit from a higher level of protection. Full and precise information is necessary to help consumers understand the risks they may face. This will enable them to take better decisions in full knowledge of the facts.

The supervisory authorities have a very important role here. They need to monitor and prevent the risks involved in making foreign currency loans. However, I believe that greater importance needs to be given to informing consumers about the cost of services.

  Olga Sehnalová (S&D). – (CS) Mr President, the Consumer Credit Directive has increased the level of protection from some predatory loans – for example, by enabling consumers to cancel a contract within 14 days without giving a reason. Even so, the monitoring bodies are still finding various defects in controls on credit providers and intermediaries for non-bank consumer credit – for example, advertisements offering credit which often do not contain all the legally required data. In the Czech Republic, for instance, this applies to up to half the cases checked. Therefore, I welcome the fact that the report calls for stronger supervision of advertising practices in order to avoid the dissemination of misleading or false information.

I shall also mention another specific problem, which relates to what are known as SMS loans. A growing number of providers of these loans, which at first glance are quick and accessible, exploit the fact that the rules are vague. As a consequence, some consumers do not anticipate that the credit terms and conditions will be so disadvantageous, and they easily get into difficulties paying it off. Therefore, I support extension of the existing level of consumer protection to loans involving amounts below the lower threshold laid down in the current directive.

  Phil Prendergast (S&D). – Mr President, misleading or unclear information regarding the total cost of loans to consumers can cause serious financial difficulties, particularly to households with limited available incomes. The Commission must ensure that the Consumer Credit Directive is correctly transposed by Member States and that consumers have a right to definite information relating to borrowing rates and charges incurred that is provided in an intelligible manner. Information provided online by financial institutions has been found wanting by Commission checks, whereas a significant majority of the websites monitored provided either insufficient or misleading information and a significant proportion of cross-border loans were taken out online. I have particular concerns about the specific risks involved. The exchange rate and interest rate variations, especially at times of financial volatility, can cause sudden and significant hikes in the cost of loans. Loans are increasingly taken out by other means, for example SMS loans. This is a cause for concern and I would urge the Commission to act on it.

  Malcolm Harbour (ECR). – Mr President, I must apologise to Mrs Collin-Langen for coming in right at the end of the debate, but I have been in Brussels for a conference all day. But I first of all wanted to thank her very much for her first report for the committee.

I think it is important to set this in context. This is a report on implementation of an existing directive. I think though that there has been considerable disappointment expressed by many colleagues here that the provisions of what is a very good directive are not actually being consistently implemented. That is really a crucial message.

The broader message I would give to the Commission is that in this committee we are not content just to pass legislation, but we want to follow it through and make sure that it is properly implemented. So I think there is some clear cause for action here.

A number of countries have raised with us during our visits the question of SMS loans. But of course it is down to them to deal with that because actually they do not need to apply the de minimis threshold to implement this regulation. But I think maybe the Commission wishes to issue some guidelines on this basis.

Finally, I would say that the Commission needs to take seriously our recommendation that this directive needs no further reforms. We actually want it to be properly implemented. We are not looking for a recast or fundamental changes to what we think is a good proposal.

(End of catch-the-eye procedure)

  Johannes Hahn, Member of the Commission. − Mr President, first I would like to express the Commission’s thanks to Mrs Collin-Langen for preparing, on behalf of Parliament, the resolution on the implementation of the Consumer Credit Directive in the European Union. This resolution is important because it represents the voice of European citizens on the important issue of borrowing, which is a sensitive area for individuals and for the European economy. While borrowing helps in everyday life, its use can also be a source of problems if not managed in an adequate manner. This is particularly relevant in the context of the current economic crisis.

The current EU legislation, the Consumer Credit Directive, adopted in 2008, intends not only to enhance the single market for consumer credit, but also to ensure a high level of consumer protection. The Commission recognises the main message of the draft resolution which points to the fact that the Consumer Credit Directive is not yet fully implemented in the Member States. We also welcome the opportunity for advertising and marketing practices to be strictly monitored and for consumers to obtain adequate explanation regarding the risk they take when entering into a credit agreement.

In line with the resolution there is certainly room for work by the Commission, in close cooperation with the Member States, to improve the implementation and enforcement of this important piece of legislation. The Commission is currently checking that the Consumer Credit Directive has been correctly transposed into national legislation by the Member States. In 2013 the Commission will organise dedicated meetings with the Member States in order to discuss concrete issues relating to the implementation and enforcement of the directive. In line with the requirements of the directive, the Commission is currently preparing a report on its implementation which is due to be published in June 2013. I can inform Members that, also for 2013, the Commission is planning a specific action in selected Member States aimed at further empowering consumers through awareness raising and education on the rights granted to them by the Consumer Credit Directive.

  President. − The debate is closed.

The vote will take place tomorrow (Tuesday, 20 November 2012).