The Consumer Credit Directive 2008/48/EC is due for implementation by June 2010. It is likely to impose new obligations on advertisers mentioning credit to provide prescribed information about the credit deal on offer. Louise Ball reveals the delights of “Standard European Consumer Credit Information”.
Topic: Financial Services
Who: Consumer Credit Directive (2008/48/EC)
When: March 2009
Law stated as at: 20 March 2009
Introduction to the Consumer Credit Directive ("CCD")
The CCD has as its objective the creation of a common credit market, with decent consumer protection, across the European Union. The Directive covers agreements for personal loans over 200€ and under 75,000€.
Following publication in the Official Journal of the European Union on 22 May 2008, Member States must transpose the CCD into national legislation by 12 May 2010. BERR has indicated that the consultation on the implementation of the CCD into UK law will take place for twelve weeks from Easter 2009. The staggered implementation of the Consumer Credit Act 2006, which serves to amend the Consumer Credit Act 1974 (the "1974 Act"), has just been completed. Now draftsmen are tasked with further modifications to primary legislation: compliance with the CCD is proving rather thorny. By way of example, the 1974 Act has no upper limits – all credit agreements are regulated. So what of the 75,000€ ceiling in the CCD?
Advertising under the CCD
Germane to lenders and their marketing and advertising specialists are the new provisions in the CCD on disclosure of standard information in a clear, concise and prominent way.
In order for consumers to be able to compare different offers, any advertising concerning credit agreements which indicates an interest rate or any figures relating to the cost of the credit to the consumer shall include a representative example showing:
(a) the borrowing rate, fixed or variable or both, together with particulars of any charges included in the total cost of the credit to the consumer;
(b) the total amount of credit;
(c) the annual percentage rate of charge ("APR");
(d) if applicable, the duration of the credit agreement;
(e) in the case of a credit in the form of deferred payment for a specific good or service, the cash price and the amount of any advance payment; and
(f) if applicable, the total amount payable by the consumer and the amount of the instalments.
However, UK lenders may avail themselves of a carve out: if an APR is required under national legislation where an interest rate or any figures relating to cost are not included in the advertisement, the requirement for the representative example does not arise.
In good time before the consumer is bound by any credit agreement or offer, the lender or its intermediary must provide on paper or on another durable medium, the Standard European Consumer Credit Information (for the exact format see Annex II to the CCD http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:133:0066:0092:EN:PDF). Overdraft facilities are also subject to specific pre-contract disclosure.
It will become clear in the Government's consultation whether the Standard European Consumer Credit Information shall replace the existing pre-contract information required in non-distance contracts.
Assisting the consumer – morally responsible lending?
Despite the pre-contractual information to be provided, the consumer may still need additional assistance in order to decide which credit agreement, within the range of products proposed, is the most appropriate for his needs and financial situation.
This extract from the CCD demonstrates an additional responsibility upon lenders and their intermediaries to ensure that the consumer can understand the effects a credit agreement may have on his economic situation.
Why this matters:
The onus of the advertiser being obliged to give additional assistance to the consumer is a new departure but, on the other hand, lenders are used to the provision of up-front pre-contractual information. These new compulsory disclosures may not mean substantial changes to the regime in this area, but will nevertheless need to be followed closely by all those looking to advertise credit.