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”) is applicable since 21 March 2016. The Directive 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 intermediaries were active representing intermediaries’ views in the preparatory phase of the Directive until its adoption, as well as the 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. The Commission DG FISMA’s 2021 Management Plan puts now forward Q4 2021 for the review, with a view to 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.

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. Of particular interest for intermediaries, the report finds:

  • MCD raised consumer protection and helped harmonise mortgage-lending practices;
  • the level of protection still differs as MCD contains many MS options;
  • consumer protection rules should remain fit for purpose (market developments / digitalisation / peer to peer lending …);
  • there is a limited single market for mortgages, little data on intermediaries’ passporting, but digitalisation could stimulate cross-border activity;
  • there is scope to increase the level of mortgage switching by consumers;
  • Covid-19 pandemic may provide further information on MCD contribution to financial stability.

Next steps

The review report will feed into next phases, whereby the Commission will carry out an evaluation based on additional evidence gathered through a dedicated public consultation and an impact assessment with a view to deciding on the next initiatives. The Commission is expected to publish some possible legislative amendments by the end of 2021.

Please also see the article “European Supervisory Authorities (ESAs) and BIPAR” for more details on EIOPA’s EU-wide thematic review looking into consumer protection issues with mortgage life and other credit protection insurance sold through banks.

- Published on June 2021 -

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