Presentation for European Economic and Social Committee 06 October - - PowerPoint PPT Presentation

Health and Consumers

Update on the work of the Commission

• n Consumer Credit Directive

Presentation for European Economic and Social Committee

06 October 2012

Maria Lissowska Unit SANCO.B4

Health and Consumers

Background

Directive 2008/48/EC (CCD) was introduced in 2008 and is now transposed by all the Member States. Objectives:  To enhance the functioning of the Internal Market for consumer credit, and in particular boost cross-border selling of credits.  To provide high level of protection.

Health and Consumers

Essential elements of the Directive

It provided for full harmonization of the following principal elements of selling consumer credits:

• Provision of standard information at the stage of

advertisement, pre-contractual, and contractual

• Calculation of a comparable measure of cost of

credit (APR) in a uniform way

• Right of withdrawal from credit agreement
• Right of early repayment.

Health and Consumers

Implementation of CCD

In 2010 Commission received anumber of questions from the Member States In early 2011 the Commission sent out a questionnaire to the Member States on the possible issues in implementation of CCD In the replies the need to amend assumptions for the calculation of Annual Percentage Rate (APR)

• f charge in particular cases was expressed

Health and Consumers

APR

A single figure representing total cost of credit for the consumer. Calculated on the basis of assumptions at advertisement, pre-contractual stage, then on real contractual conditions for contractual stage. Formula and assumptions to be applied in calculation listed in Annex I of the Directive.

Health and Consumers

Role of assumptions in calculation of the APR

Assumptions for calculating the APR should determine some of the elements involved in the formula of the APR when these are not known or cannot be ascertained at the time the APR is calculated or when they may vary, depending on how the agreement is operated. The assumptions are intended to ensure that the APR is calculated in a consistent way to promote its comparability.

Health and Consumers

Issues encountered by the MS while implementing the Directive

Uniqueness of representative example, its source Inclusion of costs of certain ancillary services in the total cost of credit Distinction of costs in case of bundles Measurement of intervals of time (if equal periods do not suffice) Calculation of APR in the case of charge cards,

• f open-end credits

Health and Consumers

Possibilities of amendments of assumptions via Comitology regime

Art.19(5). If the assumptions set out in this Article and in Part II of Annex I do not suffice to calculate the annual percentage rate of charge in a uniform manner or are not adapted any more to the commercial situation at the market, the Commission may determine the necessary additional assumptions for the calculation of the annual percentage rate of charge, or modify existing ones. These measures, designed to amend non-essential elements of the Directive, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 25(2).

Health and Consumers

How the issues were addressed

A Comitology Committee was set up according to the art. 19(5) CCD This Committee worked out the new assumptions for the calculation of APR Directive 2011/90/EU changing the assumptions was adopted on 14 November 2011 On 8 May 2012 the Guidelines on Total Cost of Credit and APR were published by the Commission

Health and Consumers

Subject of Guidelines

Health and Consumers

Review in 2013

The Commission is obliged to monitor the outcomes

• f the Directive in general and in particular with

respect to thresholds used in the Directive and to regulatory choices left to the Member States (art.27(2)). The first assessment should be carried out in mid- 2013. In 2011 the sweep of websites of creditors was carried out, 70% of advertisements seemed not conform; subject to further investigation, results end 2012.

Health and Consumers

Preparatory work for the report on the implementation of the CCD

Check of the correctness of the transposition by the Member-States:

• ngoing

Market study of the consumer credit market: ongoing

Health and Consumers

Details of the market study

Contract awarded to a consortium led by IPSOS Belgium. Scope:

• All types of consumer credits (between

200 and 75000€, also linked credits), provided by creditors or by intermediaries.

• Excluding credits secured by mortgage or

for purchase of immovable property

• In all EU Member States, and in Norway

and Iceland.

Health and Consumers

Objectives of the study

Did the Directive impact on the state of Internal Market for consumer credit in Europe? How the Directive impacted on quality of protection of consumers as borrowers?

Health and Consumers

State of Internal Market for consumer credit

Structure of the market and degree of competition (in EU as a whole and on national markets) – major players, concentration, mergers, distribution channels. Size and development of credit market, reliance of consumers on credit; volumes

• f loans for particular products.

Health and Consumers

State of Internal Market for consumer credit (cont.)

Cross-border activity – how big? By which channels? How different is quality of cross-border offers as compared to national offers? Price differences (borrowing rates, charges, APR) – within and between countries for comparable products; what are the features of the cheapest – most expensive offers?

Health and Consumers

State of Internal Market for consumer credit (cont.)

Availability of credit products – how broad? Is it different between the countries? What is cross-border availability of particular products? Defaults – how frequent for particular credit products? How related to national rules of assessment of suitability? To availability of databases?

Health and Consumers

Consumer protection

Fulfilment of information obligations

 Advertisements: how often without price information? Is standard information correctly disclosed? How does it differ according to media? Is comparison possible?  Correctness of the calculation of APR; disclosure of costs of ancillary services  Comprehensiveness of information at pre- contractual stage; manner of disclosure of non-standard information

Health and Consumers

Consumer protection

Explanations: willingness to provide them, fairness, adequacy to the needs of consumer Making use of rights of early repayment and withdrawal: how often? What impact

• f compensation on early repayment?

Impact of information disclosure on switching Awareness of creditors of their obligations

Health and Consumers

Consumer protection

Satisfaction, problems, complaints: what evidence? What reasons of complaints, how they are solved? How frequent are complaints on irresponsible lending? Consumer education and empowerment: how frequent are programs and campaigns? What is their impact on consumers? Understanding of information by the consumers: which elements and manners of disclosure are easy/difficult to understand?

Health and Consumers