Hidden costs, insufficient information or misleading advertising… The Brussels NGO Finance Watch denounces this Friday the “abusive practices” of consumer credit, which it considers still too common, and calls for tougher European regulations on the subject.
“Misleading and predatory advertising often gives the impression that low-value loans, such as payday loans and buy-it-now with deferred payment schemes, are simple and risk-free. But, in reality, they are excessively risky for the consumers who generally use them”, denounces in a press release Peter Norwood, head of research and advocacy at Finance Watch.
Deferred debit cards, “a form of misleading advertising”
Between December 2021 and February 2022, the association asked “mystery shoppers” to apply for credits in France, Italy, Denmark and the Czech Republic. Result: out of 126 offers analyzed, the vast majority (95% of cases) did not visibly display information on the consequences in the event of default and late payment. The costs associated with the loans were also not indicated in more than half of the cases.
The NGO also points to a lack of household credit checks before loans are granted. In 68% of cases, the company did not carry out an “adequate” analysis of the household budget, estimates Finance Watch.
The organization has also looked into deferred debit cards, a service offered by most French banks, which allows you to pay for all your purchases on a specific date in the month. She believes that the cards are “not identified as a credit product but rather as an ordinary bank card”, which would be “a form of misleading advertising”.
For harmonized ceilings
The NGO therefore calls for “placing the protection of the poorest citizens at the heart of the Directive on consumer credit”, which must be reinforced in the coming months. A proposal for a revision was made in the summer of 2021 by the European Commission and the project has since been under discussion in Brussels.
Finance Watch proposes in particular to adopt harmonized ceilings for the cost of credits or better supervision of advertising in this area. It also calls for all types of consumer credit to be included in the directive, in particular loans between individuals.