11 Consumer credit
| (23803)
12138/02
COM(02) 443
| Draft Directive on the harmonisation of the laws, regulations and administrative provisions of the Member States concerning credit for consumers
|
| Legal base | Article 95 EC; co-decision; QMV
|
| Department | Trade and Industry
|
| Basis of consideration | Minister's letter of 2 April 2004
|
| Previous Committee Report | HC 152-xli (2001-02), para 6 (6 November 2002)
|
| To be discussed in Council | Not known
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
11.1 The existing Consumer Credit Directive,[20]
intended to create a common market in credit and to set minimum
standards for consumer protection, is still substantially as drafted
in the 1980s. After consultations, launched in June 2001, the
Commission concluded that the current Directive is no longer in
step with the current credit market. It said there has been little
growth in cross-border transactions. It decided that the Directive
needs to be revised to allow consumers and companies to take full
advantage of the single market.
11.2 In September 2002 the Commission proposed this
draft Directive which would move from minimal harmonisation to,
with some limitations, total harmonisation. It claimed this would
better provide a high level of consumer protection and promote
a single credit market. The Directive would include:
- definition of the Directives
scope, with a split between consumer credit and mortgages for
property purchase. Only those mortgages taken out to buy or renovate
a property would be excluded. But lending for equity release
or debt consolidation purposes, and probably straightforward remortgages,
would be subject to the Directive;
- more stringent controls on credit intermediaries;
and
- improvements to lenders' access to adverse data
on a borrower to permit a more accurate assessment of risk and
ability to pay; to information for the borrower; to transparency
of agreements; and to consumer protection measures, including
a "responsible lending" requirement and a universal
14-day right of withdrawal.
11.3 When we considered the document in November
2002 we noted that the Government's Explanatory Memorandum amply
demonstrated that there was much to be clarified or amended in
the draft if the new Directive was properly to meet the needs
of UK lenders and borrowers. We said that, before considering
the document further, we would like a report on the outcome of
the Government's planned consultations, a Regulatory Impact Assessment
and a report on progress in the negotiations on the text.
The Minister's letter
11.4 The Minister for Employment Relations, Competition
and Consumers, Department of Trade and Industry (Mr Gerry Sutcliffe),
writes now to report developments since then. He tells us:
"We have held substantial informal consultations
with UK Industry and Consumer groups over the last 18 months,
and set out our general approach in the White Paper 'Fair, Clear
and Competitive: the Consumer Credit Market in the 21st
Century'[21] published
in December 03. We have however not thought it sensible at this
stage to carry out a written consultation nor do a Regulatory
Impact Assessment on the Consumer Credit Directive. This is because
it was clear that the proposal would either be withdrawn or altered
substantially, and it would therefore be better to delay the consultation
and RIA until a more realistic proposal was agreed.
"Given the long delay, I felt that it would
be helpful to update the Committee on the situation. The European
Parliament tried but failed to get the European Commission to
withdraw the proposal. The Rapporteur also failed to convince
the European Parliament to reject the proposal, and a first reading
is now taking place.
"As anticipated, the Legal Affairs Committee
of the European Parliament agreed amendments to the Directive
which substantially alter the proposal. These will be considered
by the Parliament at its Plenary in April 2004.
"Once the European Parliament first reading
has been completed, the Commission will re-draft the proposal
to take on board their comments. I expect this modified proposal
to differ significantly from the original Commission proposal,
and a written consultation and an RIA will be carried out on the
proposal at that stage. I will forward you the results of both
once they have been completed."
Conclusion
11.5 We are grateful to the Minister for bringing
us up-to-date on this proposal. Given the expectation that the
proposal will not proceed in its present form we now clear the
document.
11.6 But we will wish to consider further the
substance of the proposal when a revised draft Directive is deposited,
together with the outcome of the consultation and the Regulatory
Impact Assessment the Minister promises us.
20 Council Directive 87/102/EEC, OJ No. L 42, 12.2.87,
p.48. Back
21
Cm 6040, December 2003. Back
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