The European Parliament‘s (EP) Internal Market and Consumer Protection Committee almost unanimously approved on Tuesday (July 12) the new EU rules that, according to lawmakers, “aim at protecting consumers online from credit card debt, overdrafts and loans that are unsuitable for their financial situation.”
The new rules are part of the revision of the Consumer Credit Directive (CDD) which, after more than 14 years since it was first adopted in 2008, regulators considered wasn’t fit for its original purpose anymore. Following the rise in digital lenders and the increasing online distribution of consumer credit, the European Commission proposed a revision of the CCD in June 2021. The Commission’s proposal aims to address these technological developments by expanding its scope, introducing pricing rules for some credits, clarifying information requirements and revising creditworthiness assessments.
The recent approval by the EP’s Committee paved the way for the start of the interinstitutional negotiations between the Parliament, the Council and the European Commission, most likely after the summer recess. But even though the approval at the committee level was almost unanimous, the road for the text to become law may require further discussions. Not only did the parliament committee take longer than expected to approve its position regarding the proposed text, the approval was expected on June 15, but also the public positions of Parliament and Council differ on some points and ironing out the differences may require several rounds of negotiations.
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The EP didn’t add many changes to its original position, but it introduced further requirements to assess the creditworthiness of people taking out a loan before it is granted. For instance, companies should require information from the consumer about his or her obligations and cost of living expenses. Companies could use information from non-banking lenders, telecommunication providers and utilities, but they will be prevented from using social media and health data for the assessment.
To protect consumers, the EP also proposes rules requiring companies to offer “clear, concise and standardized credit information” easily readable on digital devices. Some other proposals may still need further clarification. For example, the parliament committee wants new rules on credit advertising that don’t incite over-indebted consumers to take credit that “suggest that success or social achievement can be acquired thanks to credit arrangements.”
