Last month, following a debate on 11 September, Members of the European Parliament (MEPs) formally adopted the new Directive on Consumer Credits (CCD) during their plenary session in Strasbourg on 12 September. The Council of the EU followed suit last week with their approval of the final text. The final text, that you can find here, was agreed upon by the negotiators of the Parliament and the Council of ministers in December 2022.
The current Consumer Credit Directive has been adopted in 2008, at a time where digital transformations had not yet led to the significant changes that the consumer credit market has experienced in the past years. The digital transformation has led to the emergence of new types of products and evolution of consumer’s behaviour and preferences. Therefore, following a long evaluation process, the Commission decided to replace the existing 2008 directive by proposing a revised version in June 2021 including new provisions, while keeping many of its original elements.
Among the changes brought up by the revision is the significant extension of the scope of the directive. It now covers loans below EUR 200, in addition with interest-free credit, leasing agreements. Concerning “deferred payments”, they will not be considered as credits if (i) they are offered without a third-party offering credits, (ii) they are free of interest without charge (expect for late payments), and finally, (iii) if the deferred payment is entirely excluded within 50 days of the delivery of the good. Different rules will apply to all large companies, that do not qualify as SMEs under the EU law, selling goods and services online. They will be exempted if (i) a third party is neither offering nor purchasing credit, (ii) the payment is executed within 14 days of delivery, and (iii) it is done with no interest or free.
Under the new rules, the information requirements have also been adapted to ensure they are appropriate for digital devices, and information free of charge will have to be provided to consumers. The CRD also provides for more rules on a proper assessment of a consumer’s creditworthiness prior to offering credit. It includes stricter rules on advertising to reduce miss-selling to over-indebted consumers, including details on information that must be included, and banned practices. The text also lays down rules on what should be included in pre-contractual information and when it should be communicated. New measures also include caps on charges, to prevent abuse and ensure consumers cannot be charged excessive interest rates or annual rates. Finally, the CRD will also grant consumers the right to withdraw from a credit agreement with no reason within 14 days of its signing.
Regarding the next steps, the directive will enter into force 20 days after its publication on the Official Journal of the EU, which should take place in the coming weeks. Member States will then have 24 months to adopt and publish the national laws necessary to comply with this directive.