The legislation, which will cover credit agreements of up to 100,000 euros, was approved with 608 votes in favor, 8 against and 15 abstentions
The European Parliament (EP) on Tuesday held its final vote on measures to protect borrowers from credit card debt, overdrafts and bad loans.
According to a press release issued by the EP, the new Consumer Credit Directive (CCD), which was already agreed at political level between Parliament and Council negotiators in December 2022, aims to ensure the smooth functioning of credit markets while ensuring high level of borrower protection.
The legislation, which will cover credit agreements of up to 100,000 euros, was approved with 608 votes in favor, 8 against and 15 abstentions.
Evaluation credit rating
It is noted that Member States will require the creditor, before entering into a credit agreement, to carry out a thorough assessment of the consumer's creditworthiness in the interest of the consumer and to prevent irresponsible lending practices and over-indebtedness. The assessment should verify the consumer's ability to fulfill his obligations.
The European Parliament secured protection clauses for cancer survivors who apply for credit that requires insurance, according to which they have the “right to be forgotten” after a relevant period of time, so that their previous illness does not affect their insurance costs.
Consumer Protection
Non-bank creditors and credit brokers (except micro and small-medium enterprises) will be subject to approval process, and will then be recorded and supervised by independent national authorities, the press release states.
Credit product advertising should always contain a clear and prominent warning that borrowing money costs money. MEPs also managed to include measures, such as caps on charges, to prevent abuse and ensure that consumers cannot be charged excessive interest rates or fees on loans or the total cost of the credit.
As overdraft facilities and lines of credit are increasingly common and costly forms of credit, these financial products will be regulated to increase consumer protection and prevent over-indebtedness.
Right of withdrawal and early repayment
It is underlined that Member States should ensure that consumers have the right to withdraw from a credit agreement without reason within 14 days. Consumers will have the right to early repayment and a reduction in the total cost of their credit. Pre-contractual information should clearly specify how this repayment is calculated.
Rapporteur's position
Rapporteur Kateřina Konečná (Left, Czech Republic) stated that “ the new consumer credit directive provides important protection for those who take out loans.' As our biggest success, he continued, “we think cancer survivors will have the right to be forgotten under the new rules – those recovering from cancer who apply for a loan that requires insurance will not be discriminated against.” “We have also made sure that advertisers will clearly warn consumers that borrowing money costs money and that the most harmful forms of advertising should be banned,” he concluded.
It is noted that the directive will come into force on the 20th from its publication in the Official Journal of the EU. Member States will then have two years to adopt the necessary legislative and administrative provisions and 3 years to implement them.
