| CONSUMER CREDIT DIRECTIVE – ECRC partners inform their Members of the European Parliament of unsatisfactory latest CCD Draft and stealth tactic employed by the Parliament Committee Rapporteur. |
The past week has seen ECRC coalition partners demonstrate their commitment and dynamic attitude to responsible credit through a swift analysis and information campaign warning Members of Parliament about an imminent serious downgrading of consumer protection in Europe . The ECRC reaction to a suddenly disclosed 5th of November proposal from the European Parliament via IMCO (the Committee on the Internal Market and Consumer Protection) for the Consumer Credit Directive’s Second Reading, was in outrage to the alarming amendments presented by Rapporteur German MEP K. Lechner completely watering down the minimum contained in the Common Position, and the ridiculous deadline of Tuesday 13th of November at 18:00 for allowing additional amendments by other MEPs.
Below is the ECRC position on the parliament draft of the CCD which contains our efforts to promote defined claims to the Directive. It was translated in French German and Italian and used by the partners to write to their MEPs.
Below is also the link to the relevant ECRC subsection of the website under “Regulation” where information and the documents themselves can be found on the Consumer Credit Directive.
The Campaign is on going as others defending consumer interests such as BEUC have been active independently from us and with the input from certain of our ECRC partners such as Altroconsumo (Italy) or Test-Achats (Belgium), but as of today the following ECRC partners have either solicited the support from MEPs or made useful comments on the unacceptable draft:
- Our UK partner Damon Gibbons from Dood was the first to contact UK MEPs and the wider media
- German partner iff contacted almost all of Germany’s 99 MEPs asking them to table amendments going against those added by MEP Lechner
- Luxemburg partner Bob Schmitz from ULC wrote a comment on some of the more worrying aspects of the recommendations put forward
- Irish partner from FLAC, Paul Joyce also used the ECRC materials on the changing state of the directive to prepare a letter that was emailed to all Irish MEP's as well as a press release similar to Damon Gibbons’ which was circulated to media in Ireland
- Director of French partner INC contacted French MEPs on Friday voicing the concerns of the coalition
- Emanuel Farrugia, President ofGhaqda tal-Konsumaturi, Malta’s Consumer Association also forwarded the ECRC position to Malta’s 5 MEP’s, one of which is a member of IMCO
- Vzbv, the Federation of German Consumer Organisations produced a detailed comment on the various amendments brought forward by the IMCO-Committee Rapporteur on Friday, which will hopefully "guide" and help motivate MEPs to intervene against the Draft Recommendation before the Tuesday deadline.
- Our Greek partner EKPIZO also gave its comments and will respond further. Agreeing with the ECRC position, Melina Mouzouraki would nevertheless stress that she would add:
a) a bullet on advertising, Lechner's proposal will make the obligation information in advertising less clear; and b) on the very last point on early repayment, a few words need to be added to explain why this is so important for consumers, i.e. consumers should not be locked in long term credit contracts and, if no charges are applied in early repayment, that would enhance competition in the credit market.This in fact according to our experience in Greece after 2003, when the early repayments clause in home-loan contracts was found unfair and illegal. Since 2003 we have the jurisprudence saying the early repayment charge is illegal in the case of a fluctuating interest rate. On the basis of this jurisprudence thousands of consumers have claimed back early repayment charges that they have paid to banks. And not only that : after abolition of early repayment charges, competition in the market of home loans is much more intense. Consumers seek for a better offer (i.e. a lower interest rate) from banks and do not hesitate to "move" their home loan to another bank.
With the EU Consumer credit “Second” Reading due soon, amendments made by the MEP Mr Lechner have ignored consumer organisations and damaged the trust they had in a balanced solution. The recommendations put forward by the rapporteur constitute a serious set-back for consumer protection, and the renewed disrespect shown towards consumer consultation processes will affect consumer confidence in the text.
The insidious nature with which these amendments have appeared may even have jeopardised the updating of the EU Consumer Credit Directive altogether if the European Commission ends up feeling compelled to simply withdraw the proposal for revising the existing consumer credit directive, which we all agree is necessary. Some Members of Parliament may actually prefer the proposal to be withdrawn, but the hope is that the majority of reasonable-minded deputies will actually want to have a good, workable directive adopted. This means them having a deep concern over many of Mr Lechner's amendments, and being strong enough and having reacted fast enough to reject almost all of Mr Lechner's controversial amendments. Even if Mr Lechner was to table some amendments of his own to soften his position, and even if other MEPs table something on civil sanctions as a counterweight to the present changes, consumers will still feel disappointment in having been treated in such a way.
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With the strong representation of British MEPs in the IMCO committee, here below is the email which DOOD sent to all UK MEP's.
Dear MEP,
We understand that the second reading of the Consumer Credit Directive is scheduled for Monday 5th November, and write to seek your help to ensure that a high level of protection is retained for UK consumers in this market.
As members of the European Coalition for Responsible Credit (www.responsible-credit.net), it has been brought to our attention that the Rapporteur's redraft of the Directive being submitted for second reading contains a number of areas where the original directive, approved by MEP's at first reading, is being weakened from a consumer perspective.
We have had the benefit of advice from Bob Schmitz, EU Counsel, which is attached, and also of discussion with Professor Udo Reifner at the IFF (Institute for Financial Services) in Hamburg, and are particularly concerned that the draft being presented on Monday:
(i) Attempts to reduce the scope of the Directive - for example by excluding small sum credit such as payday lending which can result in APR's of 1,000% plus being made to low income borrowers. Overdrafts, credit card lending, and hire purchase and leasing are also inadequately covered by the latest draft which in some instances effectively de-regulates lending in these forms (particularly leasing and overdraft credit).
(ii) Reduces the requirements to give borrowers clear information on the price of credit - in particular by demoting the importnace of the APR by reducing the number of costs, fees etc that need to be included within it. The result will likely be to make the APR a much less effective source of information to consumers and so reduce competition in the market (clear prices being a precursor to efficient markets).
(iii) Threatens the minimum harmonisation principle contained in the first draft of the directive that would allow nation states to develop culturally appropriate and effective measures to counter over-indebtedness and replaces these with a total harmonisation of delivery of information to consumers in this area.
(iv) Will prevent borrowers from paying off debt without penalties and act as a disincentive for consumers to clear their debts.
In view of the above, we are asking that UK MEP's request the following in the debate on the second reading:
1. A consistent APR regulation that ensures that APR's include the cost of all linked service contracts which the supplier offers to conclude before or at the same time as when the credit is granted
2. A rulethat small credit falls under the directive if it is directly or indirectly used to refinance other credit or if it leads to a continuing debt burden
3. Maintain the right of paying off one’s debtat any time without penalty and fees
4. A rule where "total harmonisation" is reduced to "standardisation" of information delivery but does not replace the "minimum harmonisation" principle which allows members states to find better and culturally more adapted solutions in due time to prevent over-indebtedness in their home country.
5. A special investigation into payday loans and credit card credit which have become the forerunners of over-indebtedness and impoverishment in society.
We hope that you are able to make an intervention on this issue. If you require further information please do not hesitate to contact us by return.
Damon Gibbons
Chair
Debt on our Doorstep
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| ID: |
40454 |
| Author(s): |
SCR |
| Publication date: |
12/11/07 |
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Created: 12/11/07. Last changed: 12/11/07.
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