| EUROPEAN MORTGAGE REGULATION: a Lobby Affair? |
12 EBIC members co-opt three consumer representatives to define future mortgage regulation with DG Market. Final Report announced for December 2006.
FAILED SELFREGULATION PRESENTED AS A SUCCESS
After a promising draft to regulate mortgage loans on an EU level in the eighties industry and Commission replaced this draft by a recommendation in which the industry signed a voluntary code. This Code according even to the French and Spanish bankers' associations remained far behind the standards of their national legislation which caused them not to sign it. After a study commanded by DG SANCO on the effectiveness of this code iff together with partners in all member states found out that even this pure information sheet was not observed by the banks whose organisations had signed it. Only 3% of the cases in this silent shopping project showed full compliance.
Voluntary agreements signed by impotent bankers' associations with no authority with their members have not worked well anywhere. The German government in its recent report to the parliament made this experience with the German voluntary code to provide minimum banking accounts for poor people (which had once been offered as an alternative to a legal right). Another example of sham self regulation is presently discussed by DOOD in the UK where the OFT fines banks for usurious practices in selling credit insurance but fails to help the victims. (See our news)
One would expect the Commission to at least repeat this test, which had such devastating results, in a similar fashion to what the German government does in its biannual report on the effectiveness of voluntary bank agreements. Instead, the agreement is presented as a success, and the impression of control is pretended as stated in the latest FIN-FOCUS newsletter:
"The Commission has undertaken a series of initiatives aimed at ensuring that consumers are able to make an informed choice about their mortgages since these are such important decisions affecting home life and wellbeing. In 2001, the Commission agreed that all lenders should make the same information available to borrowers in the form of a voluntary agreement, a Code of Conduct, between the mortgage industry and consumers. The aim is to make all mortgages in the EU more easily comparable. Mortgage lenders who sign up to the Code agree to give the borrower general information about products, including the type of interest rates offered. The Commission monitors how the Code is put into practice and has published a list of mortgage lenders who are committed to respecting it."
HOW MANY EXPERT GROUPS WILL THE COMMISSION NEED TO FIND ACCEPTABLE OPINIONS FOR ITS POLICY?
In fact the "series of initiatives" is more aimed at ensuring their way to a European Mortgage Market. After the failure of the code of conduct, the Commission had already created a paritarian group of experts from consumer and bankers' sides, which published a report which clearly showed that on APR disclosure, early repayment fees, consumer advice and information duties, both sides could not agree at all. This was especially true for early repayment, where according to an expertise from French bankers they wanted to make the German model of exorbitant early repayment fees up to 20% of the residual value in long term contracts general for all states where still caps at about 3% help to guard the right of consumers to mobility. Whether low interest rates disclosed in endowment mortgages are fair is another point where the Commission together with Germany, the UK, Ireland and the Netherlands cannot even agree with the views of the Romanic states that support the consumer perspective.
EUROPEAN BANKING INDUSTRY COMMITTEE GETS OFFICIAL EU STATUS?
While the problems are apparent and European consumers truly await a political decision on how the only interesting trans-border market which exists in consumer credit could be opened to them, and while all consumer organisations ask to simply insert mortgage loans into the consumer credit directive as it is the case in many countries, the Commission created another group instead, and seems to be willing to create one expert group after the other until finally in the end their findings will match with those that the Commission wants itself:
"In 2006, the Commission launched the Mortgage Industry and Consumers Expert Group (Mortgage Dialogue) which meets eight times over nine months, and where consumer and industry representatives explore solutions acceptable to both sides on four essential issues: information, advice, early repayment and Annual Percentage Rate (APR)."
WHAT IS THIS GROUP ABOUT?
In fact this group is nothing else but the European Banking Industry Committee from which 12 of its 18 members come from. The other members are either sent by BEUC (3 members), come from the coops (1, who include financial suppliers), or from family organisations (2). Without the names of the mostly dominating representatives of DG Market listed, one can argue that the EBIC has invited BEUC to talk about the future of European mortgage regulation. BEUC who after having signed the first voluntary agreement then withdrew the signature after the critique was manifest, should carefully control under which conditions they speak to the supplier side, and should ideally try and suggest how a more even system could be put in place.
ECRC OPINIONS: INTEGRATION INTO THE CONSUMER CREDIT DIRECTIVE AND UNIFICATION OF A EURO SECURITY
Most members of ECRC favour an integration of mortgages into the Consumer Credit Directive. As this Directive has been reduced to a pure information directive there is no reason why mortgages should be less transparent and mortgage lenders less prudent, especially because mortgages are increasingly (mis)used to finance consumption instead of homes. In addition, the true problems arise from the securities, where the EU fails to propose a unified regulation which should make the Euromortgage linked to the credit the only acceptable trans-border security. The German system again is the most dangerous system of securities because it allows banks to sell the securities independently of the credit. The present scandals, where several hundred thousands of consumers in Germany are ripped of their assets through fraudulent sales of mortgages used to pay real estate without value, will soon again be at the European Court of Justice following the Stuttgart Court of Appeal asking for a decision to overrun the German Supreme Court.
ANNEX: MEMBERS OF THE NEW EU MORTGAGE GROUP
*DHANDA Tina European Consumers' Organisation (BEUC)
*FERRETTI Isabella European Banking Industry Committee (EBIC) / European Banking Federation (EBF) Associazione Bancaria Italiana (ABI), Italy
*FOREST Dominique European Consumers' Organisation (BEUC)
*GOUVEIA Rodrigo European Community of Consumer Co-operatives (Euro Coop)
*SCHINDLER Nina European Banking Industry Committee (EBIC) / European Association of Cooperative Banks (EACB)
*HEYWOOD Andrew European Banking Industry Committee (EBIC) / European Mortgage Federation (EMF) The Council of Mortgage Lenders (CML), UK
*KOLLER Michaela European Banking Industry Committee (EBIC) / European Savings Banks Group (ESBG)
*KÖNIG Christian European Banking Industry Committee (EBIC) / European Federation of Building Societies (EFBS)
*LAMBERT Annik European Banking Industry Committee (EBIC) / European Mortgage Federation (EMF)
*MOLISSE Noël Confédération des Organisations Familiales de l'Union Européenne (COFACE)
*O'ROURKE Eimer European Banking Industry Committee (EBIC) / European Mortgage Federation (EMF) Irish Bankers Federation (IBF), Ireland
*PRIESTER Robert European Banking Industry Committee (EBIC) / European Banking Federation (EBF)
*REVENU Nicolas Confédération des Organisations Familiales de l'Union Européenne (COFACE)
*SAGEN Jan European Banking Industry Committee (EBIC) / European Mortgage Federation (EMF) AB Spintab, Sweden
*STUMPE Dirk European Banking Industry Committee (EBIC) / European Savings Banks Group (ESBG) Sparkasse Bochum, Germany
*THEISEN-WACKET Claudia European Banking Industry Committee (EBIC) / European Association of Public Banks (EAPB) Association of German Public Sector Banks (VÖB), Germany
*WENGLER Christoph European Banking Industry Committee (EBIC) / European Association of Public Banks (EAPB)
*WESTPHAL Manfred European Consumers' Organisation (BEUC) |
| ID: |
39196 |
| Author(s): |
iff |
| Publication date: |
13/12/06 |
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Created: 13/12/06. Last changed: 13/12/06.
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