Consumer Credit and Mortgage Credit Directives

Consumer Credit Directive (CCD)

Following implementation checks of the Consumer Credit Directive (CCD - 2008) that pointed out certain shortcomings of the Directive, the Commission launched an evaluation of the Directive. BIPAR, together with its working party on credit, responded to several consultations in this respect. On 1st July 2021, the Commission published a review proposal of the Directive as part of its “New Consumer Agenda”.

According to the Commission, the main drivers for the proposed changes were digitalisation, recent other newer EU legislation in fields relevant for consumer credit, Covid-19 and over-indebtedness.

Some key proposed changes in the Commission’s proposal for credit intermediaries include:

  • a wider scope of the Directive (crowdfunding, credits below 200€, leasing etc…);
  • more detailed (precontractual) information requirements (an additional document);
  • new rules on cross selling with a ban on tying (but derogations based on Mortgage Credit Directive solution);
  • new rules on advice and on the use of “independent advice” or “independent advisor”;
  • caps on one or more of the following: interest rates, annual percentage rate of charge, the total cost of the credit to the consumer;
  • additional conduct of business obligations and knowledge and competence requirements;
  • Member States (MS) to ensure admission, registration, and supervision for creditors, intermediaries and crowdfunding providers.

 

BIPAR’s position focuses on the following points:

  1. Credit intermediation and a level playing field (remuneration, advice, ancillary intermediation, etc.);
  2. Caps on interest rates, annual percentage rate of charge or total cost of credit to the consumer;
  3. Cross-selling;
  4. Overload of precontractual/general information;
  5. Access to credit databases;
  6. Additional proportionality for micro and SMEs.

 

The proposal is currently under discussion in the European Parliament (EP) and Council.  Trilogue will start in autumn 2022.

Directive on credit agreements for consumers relating to residential immovable property

The Directive on credit agreements for consumers relating to residential immovable property (“Mortgage Credit Directive” or “MCD”) has been applicable since 21 March 2016. It aims to improve consumer protection measures across the EU and establishes principles for the authorisation and registration of credit intermediaries. BIPAR and its working party on credit were actively representing intermediaries’ views in the preparatory phase of the Directive until its adoption, as well as Levels 2 and 3 proceedings, providing input amongst others to EBA consultations regarding the PI cover of credit intermediaries in 2019-2020.

The MCD stated that the Commission should undertake a review of the Directive by 21 March 2019. In May 2021, the Commission published a report on the review of the MCD, together with a short annex on the role of credit intermediaries in mortgage lending. The review of the MCD will look at possible legislative amendments to ensure that the Directive fully achieves its aims and addresses the challenges of digitalisation and sustainability. The exercise is also set to include an assessment of the main provisions of the Directive, notably on the creditworthiness assessment, precontractual information and forbearance measures.

The Commission organised a public consultation on the review, to which BIPAR, together with its working party on credit, responded in February 2022, including questions on information to consumers/digitalisation, on green mortgages, on tying and bundling and on credit intermediaries (their passporting right under the MCD and their (non) use of it).

In its reply, BIPAR, amongst others, stressed that the MCD is relevant, but that the administrative burden needs to be tackled in a review (for example, the ESIS could be simplified and made more concise) and that the issue of cross-selling should be reviewed, as there are still cases where de facto consumers are bound to an insurance (which is, in principle, a yearly contract) for the same duration as their mortgage loan. BIPAR also called for more study with regard to the so-called “robo-advice”. Regarding credit intermediaries’ European Passport, BIPAR stressed that for this to work in practice, it is important that as much legal clarity and certainty as possible is given to business. Clarity and consistency in the content of the information to be notified by credit intermediaries wanting to operate cross border has been ensured by the EBA guidelines, but there is even a bigger need for legal clarity regarding the triggering element regarding FOS and FOE activities of credit intermediaries.  

A second consultation took place over summer and BIPAR responded to this in August 2022.

 

Next steps

The Commission still foresees a call for advice to EBA, as well as a study to support an impact assessment.  The indicative planning for Commission’s action is currently in the first quarter of 2023.