Brussels,

EU Policy on Consumer Credit​

The EU rules to strengthen consumer rights.

Consumer Credit

EU rules on consumer credit are designed to strengthen the consumer rights and to help them make an informed choice:  

Before sign an agreement, the lender must:
​

• give standardised information to make it easy to compare offers
• inform on the Annual Percentage Rate of charge (APR) – i.e. the total cost of the credit
• assess your creditworthiness i.e. your ability to pay back the credit in a sustainable way

You can cancel the agreement within 14 days of signing. You can also repay the loan or credit at any time.

The Review of the current Directive

On 30 June 2021, the European Commission presented a review of this Directive.

​The initiative followed its evaluation published in 2020, which highlighted several challenges hindering its functioning, in particular in terms of scope, information provision and creditworthiness assessment. The review, also included among the New Consumer Agenda actions, took into account the impact of COVID-19 on the credit market and on consumers, including vulnerable ones.

Since the introduction of the 2008 Directive, the landscape of decision-making and consumer preferences has been significantly transformed by digitalization. Nowadays, consumers increasingly seek a more streamlined and rapid credit application process, often opting for online channels.

​This shift towards digitalization is also reshaping the lending industry, with emerging players like peer-to-peer lending platforms offering diverse credit options. Furthermore, novel financial products, including short-term high-cost credit, have emerged as a result of this digital evolution. Additionally, digitalization has ushered in innovative methods for digitally disclosing information and evaluating consumer creditworthiness through automated decision-making systems and unconventional data sources.

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Credit rights

​When taking out consumer credit, there are rules in place to guarantee a way out, should it be needed.

The right to make informed decisions
Consumers have the right to obtain advertisements containing standard information, and  request information from the credit provider on the terms and conditions of the contract. This pre-contractual information has to contain all the standardised items, which will be later replicated in the contract.

The right to change your mind 
After signing a credit agreement, consumers have the right to change their mind and withdraw from credit agreement without giving any reason within 14 days. 

The right to pay back ahead of time
​If consumers are able to pay back their credit earlier than foreseen in the contract, they have the right to pay back their credit ahead of time.

Consumer credit information
A creditor must always provide key information in a standardised format called the Standard European Consumer Credit Information form.
Such form must put out the total cost of the credit expressed as an annual percentage of the total amount of credit - the annual percentage rate of charge (APR) - to help consumers to compare different offers. The Commission issued Guidelines in 2012 on the cost of credit and the APR. The Commission issued Guidelines in 2012 on the cost of credit and the APR.

Mortage Credit

The European Union mortgage credit market is currently fragmented, posing challenges to cross-border service provision.

The financial crisis further eroded confidence in the financial sector and highlighted the need for EU-level action to address issues arising from irresponsible lending across borders.

The EU is actively working to:

1. Foster integration in the mortgage credit market.
2. Promote standardized practices.
3. Safeguard consumers throughout the EU.

EU regulations for mortgage credit are outlined in the Mortgage Credit Directive (MCD), which aims to create a unified EU mortgage credit market while prioritizing consumer protection.

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​The MCD applies to loans for residential property purchases and includes the following key provisions:

1. Mandating lenders to provide clear and comprehensive information about loan terms to consumers.
2. Requiring lenders to assess consumer creditworthiness based on common EU criteria.
3. Establishing uniform quality standards and ethical principles for all EU lenders.
4. Granting consumers the right to repay credit ahead of the agreed contract schedule.
5. Enabling an EU passport scheme for authorized credit intermediaries to offer services across the EU.