On 5 November 2020, the European Commission published several documents which report on the findings of the Commission’s work to evaluate the effectiveness of the Consumer Credit Directive (CCD). These documents include a:
- report to the European Parliament and the Council which identifies areas where the CCD has had a positive impact as well as its shortcomings;
- Commission’s evaluation report; and
- standalone executive summary of the evaluation exercise.
The European Commission launched a consultation to evaluate the CCD in January 2019, the aim of the evaluation exercise was to examine whether the CCD objectives had been achieved and whether the CCD remained fit for purpose. It also considered the impact on consumer protection across the EU and whether it had any influence on the pan-European consumer credit market.
Main findings
As a result of the evaluation, the Commission has identified the following:
- the CCD has broadly achieved the objectives of ensuring high standards of consumer protection and the development of well-functioning internal credit market;
- the cross border credit market is limited and hampered by low levels of harmonisation of the regulatory framework, however, the digitalisation of credit and consumer interest in this, may help with developing a stronger cross border credit market;
- the CCD provides a framework to protect consumers which some Member States have chosen to ‘gold-plate’ through their national legislation;
- some of the more effective provisions in the CCD relate to withdrawal rights, early repayment and the Annual Percentage rate of Charge (APR);
- there are differing approaches and a lack of standardisation relating to affordability/creditworthiness assessments and the types of information used in these assessments. Access to information about consumers across EU member states is limited;
- market developments, changing consumer habits, new types of credit product, digitalisation and technological innovation all need to be considered and CCD provisions should be adapted to ensure that the CCD remains effective in providing appropriate consumer protection; and
- the CCD is generally effective, easy to understand and compliments other relevant EU consumer legislation, greater clarity and consistency in its application would benefit consumers and creditors as well as a greater degree of consistency with the Mortgage Credit Directive and GDPR.
The findings should help inform appropriate revisions to the CCD which are planned for the second quarter of 2021. Future EU consumer credit rules are unlikely to directly impact the UK market after EU exit day, however, as UK regulators continue to liaise with the EU, certain of the approaches taken under the CCD could to be adopted in the UK to provide some degree of consistency between the EU and UK policy and regulatory frameworks.
For further information on the above, please contact Sophie Lessar or Louise Neave.
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