MEPs want better protection for consumers applying for loans online – The European Sting – Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology

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The new EU rules aim to protect consumers online from credit card debt, overdrafts and loans that are unsuitable for their financial circumstances.

In a text adopted by the Internal Market and Consumer Protection Committee, with 42 votes for, 1 against and 1 abstention, MEPs believe that the legislation should cover credit agreements up to €150,000, the actual ceiling to be determined by the competent national authorities according to the particular economic situation of a Member State. Member States will also be able to apply limited changes to obligations in the case of low-value loans of up to EUR 200, loans granted without interest and without other charges, or loans which must be repaid within three months and with charges minors

Credit rating

MEPs introduced additional requirements to assess the creditworthiness of people taking out a loan before it is granted, including requiring information on the consumer’s current obligations or the cost of living. In order to assess the creditworthiness of consumers with little or no credit history, other information may be considered, such as that from non-bank lenders, telecommunications providers and utilities.

However, social media data and health data should not be considered and the right to be forgotten should be respected.

MEPs also agreed that the European Banking Authority (EBA) should develop guidelines detailing how creditors and crowdfunding service providers carry out this creditworthiness assessment.

Clear information for consumers

Consumers should always obtain standard information in order to be able to compare different offers and understand the legal and financial consequences of loans and credit costs. Information should be posted in advance and clearly. Consumers need to be able to see all essential information at a glance, even on their phone.

They should also be reminded that they have the right to terminate the credit agreement or the agreement for the provision of crowdfunding credit services without giving any reason within 14 calendar days.

consumer protection

MEPs stressed that credit advertising should in all cases contain a clear and visible warning that borrowing money costs money, and should not encourage over-indebted consumers to ask credit or to suggest that success or social success can be gained through credit agreements.

As overdraft facilities and overdrafts are increasingly common forms of consumer credit, MEPs want to regulate these financial products in order to increase the level of consumer protection and avoid over-indebtedness.

Next steps

Parliament’s negotiators are ready to discuss with the Council and Commission the final form of the rules, after the green light from the plenary.

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