The EU renews the credit law to increase consumer protection

by time news

The Council of the EU and the European Parliament reached an agreement on Thursday to renew the consumer credit directive. The reform seeks to force lenders to give clear informationalso on online platforms, and ensure the solvency of consumers.

“The review of the consumer credit directive modernizes and improves protection at the European level for consumers applying for credit“, said the Czech Minister of Industry and Trade, Jozef Síkela, whose country holds the six-monthly presidency of the Council of the EU, which will pass the baton on January 1 to Sweden.

Thus, the consumer credit directive, which repeals and replaces the one that currently exists since 2008, will ensure that consumers can make an informed decision when applying for credit. “Promotes responsible and transparent practices by all stakeholders involved in consumer credit, for example, by ensuring that credit information is presented in a clear and understandable manner, and is adapted to digital devices,” Sikela said.

More transparency, more protection

Thus, before signing a credit agreement, the lender must ensure that consumers have easy access to all information necessary and that they are informed about the total cost of credit. In addition, lenders must assess the creditworthiness of the consumerwhere they must evaluate if someone can pay their credit.

These consumer credit rules will ensure that consumers are protected from irresponsible credit practices that could lead to a over-indebtedness, highlighted the Council in a statement. The new credit rules will apply to certain risky online loans that are excluded from the scope of the directive currently in force, such as those below 200 euros, those offered through crowdlending platforms or those that are offered with the “buy now pay later” formula.

Along with the review of the general product safety regulation, the consumer credit directive is part of the new consumer agenda, launched in 2020, with the aim of update the overall strategic framework for EU consumer policy. Once the Council and the European Parliament proceed to its formal adoption, the new directive will enter into force after its publication in the Official Journal of the EU.

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