“Crucial to ensure adequate information and protection” – EU’s Didier Reynders on new consumer credit rules

EU updates rules in move to protect citizens from online debt.

The updated consumer credit directive will make sure consumers have easy access to necessary information, and be informed about the total cost of the credit. It covers areas including buy-now-pay-later schemes and short-term high-cost loans, following the Commission’s proposal in June 2021. The new legislation is also intended to function better in the digital mobile era, and aims to provide higher protection for consumers taking out credit online.

“In the current cost-of-living crisis, where consumers may need to use credit for their basic needs, it is absolutely crucial to ensure they have adequate information and protection. The digitalisation process, enhanced by the pandemic, profoundly changed the financial sector, and new forms of credit are being proposed to vulnerable consumers online. The new rules will contribute to increasing consumer confidence and will foster responsible practices, both online and offline,” said Didier Reynders, EU Commissioner for Justice.

Total cost of credit

The Directive is intended to provide for stronger, modern rules, set a level playing field for all credit operators and work for fair access to credit. Lenders will need to assess a consumer’s creditworthiness and assets if the lender is able to repay their loans. The directive will also aim to limit costs by setting caps on interest rates, annual percentage rates of charges or the total cost of the credit.

To keep up with digitalisation, the new credit rules will now also apply to certain risky loans that are excluded from the current legislation. These include:

  • loans below €200 ($209);
  • loans offered through crowd-lending platforms;
  • buy-now-pay-later products.

“Consumers can easily apply for credit online but might not always be well-informed on the consequences of this application. They need to be able to know what they sign up for and how much they eventually have to repay. This agreement will ensure that citizens have sufficient and clear information about their credit agreements,” said Jozef Síkela, Czech minister for industry and trade.

Crucial protection

“The cost-of-living crisis fuelled by Russia’s war against Ukraine has put millions of consumers in financial difficulty, and an increasing number of Europeans are taking credits to finance their needs. It is crucial that consumers are properly protected against unfair practices, and that they benefit from the highest safeguards when taking a credit online, just as much as they do offline,” said Věra Jourová, Vice-President for Values and Transparency.

The provisional agreement on updating the consumer credit directive is subject to approval by the Council and the European Parliament. The revised legislation will replace the current 2008 directive on consumer credit agreements.