40 Consumer credit
| (26117)
14246/04
COM(04) 747
| Amended draft Directive on the harmonisation of the laws, regulations and administrative provisions of the Member States concerning credit for consumers
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| Legal base | Article 95 EC; co-decision; QMV
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| Department | Trade and Industry
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| Basis of consideration | Minister's letter of 6 June 2005
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| Previous Committee Report | HC 38-ii (2004-05), para 4 (8 December 2004)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared, but see para 40.5 below
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Background
40.1 The existing Consumer Credit Directive,[158]
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
needed to be revised to allow consumers and companies to take
full advantage of the single market. In September 2002, the Commission
proposed a draft Directive which would move from minimal harmonisation
to, with some limitations, total harmonisation. It claimed this
would provide a higher level of consumer protection and promote
a single credit market. In April 2004 our predecessors cleared
the proposal because it was to be replaced by the present document.
40.2 The current document is the amended draft Directive,
which is in the form of Commission comments on the European Parliament's
152 amendments to the original draft Directive, with revisions
to be read alongside the original text. Our predecessors considered
this amended draft in December 2004 and commented that it was
clearly of continuing significance for both UK credit providers
and consumers and that they would wish to consider it further
it the light of the outcome of the Government's proposed consultation
and its Regulatory Impact Assessment.
The Government's view
40.3 The Parliamentary Under-Secretary of State for
Employment Relations and Consumer Affairs, Department of Trade
and Industry (Mr Gerry Sutcliffe) now sends us a 46 page report
on the 47 responses to the Government's consultation (which was
based on a partial Regulatory Impact Assessment). The responses
were from 51 organisations representing industry, consumer groups,
regulators and enforcement officers and the law.
40.4 The Minister tells us that the Commission is
now expected to come forward with a yet further amended draft
Directive in July 2005 and that the Government will publish a
formal response to the consultation and elaborate a negotiating
stance only when it sees this revised proposal. Nevertheless,
for the record, we annex the executive summary of the report of
the responses to the consultation.
Conclusion
40.5 In the light of these developments we clear
this document. But when we scrutinise the promised revised proposal
we will wish to see the Government's formal response to the consultation
and a new Regulatory Impact Assessment.
Annex — The Department of Trade and Industry's
executive summary of responses to its consultation on the draft
Consumer Credit Directive
Whilst there was a considerable degree of support
for the aims and objectives of the proposed Directive, there was
concern that, as drafted, it could impose burdens on business
and introduce inflexibility on the one hand while at the same
time reducing consumer protection on the other. Some businesses
said that it would have little positive impact on the development
of a single market, whose emergence depended more on other factors,
which were being addressed by other means. Some of the consumer
lobby was concerned that the Directive concentrated too much on
the front end (information, transparency etc) rather than on matters
arising during the life of an agreement and, for example, extortionate
credit.
In many areas there was strong support for the UK
position as set out in the Consultation Document. The majority
of respondents supported the UK Government position that the regulation
of consumer credit must be proportionate and that this could best
be delivered through targeted, rather than purely maximum harmonisation,
although there were mixed views on which areas should be subject
to maximum and which minimum harmonisation. Most agreed with the
proposed UK line on the inadvisability of the responsible lending
requirement and the duty to advise. There was general support
for the exclusion of Credit Unions from the scope of the directive
and for the proposed position on database access, and the APR.
The majority of respondents felt that maximum harmonisation of
the APR would be essential to protect consumers and enable them
to make meaningful comparisons.
Most respondents agreed with the UK line that Article
15 concerning unfair contract terms was unnecessary. There was
also strong support for the UK position in relation to the Chapter
on "Performance of a Surety Agreement" and a near-unanimous
view that Article 22 concerning open-end credit agreements was
unnecessary.
There was firm support for the UK position on the
assignment of rights, subject to the issue of securitisation being
resolved, and there was strong support for the UK position as
set out in the consultation document in relation to Joint and
Several Liability, and cheque cashing. There was overwhelming
agreement that intermediaries should be required to divulge whether
they were independent brokers, but less clear views on whether
the instances when a credit intermediary can charge a fee should
be limited. Nearly all of those who responded agreed that the
proposed provisions on the notice period for cancellation of credit
would cause difficulties for lenders and could increase fraud
and most respondents agreed with the proposition in the consultation
paper that a minimum harmonisation approach should be adopted
to default and enforceability.
However, there were also a number of concerns expressed
in relation to the Directive and the UK position in a number of
areas. A range of concerns were raised about the definitions in
the proposed directive. There did not appear to be a great deal
of support for a light touch regime for credit agreements aimed
at refinancing the existing debts of a consumer, and there was
clear concern that debt consolidation specialists should be subject
to full regulatory requirements.
Most respondents supported the proposition that the
UK should support a 14-day cancellation period but argued for
the inclusion of specific provisions on repayment and the return
of goods. There was some concern about the cost implications of
traders having to accept returned goods unless there was provision
for compensation although there was a consumer/regulatory view
that a 14 day unconditional withdrawal provision would be a step
forward in terms of consumer protection.
In other areas, there was no clear consensus. Although
there was general agreement that the proposals concerning information
required in advertisements would not assist the development of
a cross-broader market, there was a difference of view on what
the core requirements should be and whether maximum harmonisation,
minimum harmonisation or mutual recognition would be the best
way forward in each case. All parties appeared to agree that only
key or important information should be included in Contractual
Information, but there were differences of view with regard to
the kind of information which this comprised. There was disagreement
about the level of harmonisation that should be applied to early
settlement, but support for the recently updated rules.
There were mixed views on whether the Chapter on
Registration, Status and Control of Creditors and Credit Intermediaries
would be strong enough to protect consumers in an Internal Market,
but there was strong support for ensuring that the UK licensing
regime is maintained. There were also diverse views on passporting,
with a slight favour towards introducing a fitness test and passporting
for creditors and credit intermediaries.
Finally, little new information was forthcoming on
costs and benefits; a number of respondents preferred to wait
for the Commission's revised proposal before commenting further.
158 Council Directive 87/102/EEC, OJ No. L 42, 12.2.87,
p. 48. Back
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