Abstract

A lot more than ten years following the outbreak of this international crisis that is financial customers throughout the EU have already been increasing their standard of debt when it comes to both amount and value of credit rating services and products. On the list of known reasons for this trend would be the low interest environment, the novel business methods of lenders directed at finding brand new income sources, such as for instance charges and costs on loans, while the revolutionary company models rising in an ever more electronic market, such as for instance peer-to-peer financing. These developments provide brand brand new dangers to customers and pose new challenges for regulators when it comes to simple tips to deal with them. This short article aims to discover the problematic facets of credit rating provision into the post-crisis lending environment across the EU also to evaluate as to the extent the 2008 credit rating Directive presently in effect, which aims to guarantee sufficient best online payday loans in Utah customer protection against irresponsible financing, is fit for the function today. In this context, this article explores the overall concept of “responsible lending” with emphasis on credit, identifies probably the most imminent reckless financing techniques within the credit areas, and tentatively analyses their key motorists. Moreover it reveals some essential restrictions for the customer Credit Directive in supplying sufficient consumer security against irresponsible lending and provides tentative tips for enhancement. When you look at the authors’ view, enough time now seems ripe for striking a unique stability between use of credit and customer security in European credit rating legislation.

Background

A lot more than 10 years following the outbreak associated with international crisis that is financial customers over the European Union (EU) have already been increasing their amount of debt when it comes to both volume and value of credit rating services and products (European Banking Authority 2017, pp. 4, 8). On the list of grounds for this trend would be the low-value interest environment, the novel business techniques of lenders aimed at finding new income sources, such as for instance charges and charges on loans, in addition to revolutionary company models appearing in an extremely electronic marketplace, such as for instance peer-to-peer financing (P2PL) (European Banking Authority, 2017 pp. 4, 8). These developments present brand new dangers to customers and pose brand brand new challenges for regulators when it comes to how exactly to deal with them. The problem of irresponsible consumer credit lending deserves unique attention in this context. Such lending might cause unsustainable degrees of overindebtedness leading to major customer detriment. In addition, it could be troublesome to your functioning of this EU’s market that is single monetary services.

The main little bit of EU legislation currently regulating the supply of credit – the 2008 customer Credit Directive Footnote 1 –aims at assisting “the emergence of the well-functioning interior market in consumer credit” Footnote 2 and ensuring “that all consumers ( … ) enjoy a top and comparable degree of security of these passions,” Footnote 3 in specific by preventing “irresponsible financing.” Footnote 4 This directive, which goes back into the pre-crisis period, reflects the info paradigm of consumer protection as well as the matching image of this “average consumer” being a reasonably well-informed, observant and circumspect star (Cherednychenko 2014, p. 408; Domurath 2013). The concept behind this model would be to increase the consumer decision – making process through the guidelines on information disclosure directed at redressing information asymmetries between credit organizations and credit intermediaries, regarding the one hand, and customers, in the other. Especially in the aftermath regarding the economic crises, but, severe issues have already been raised in regards to the effectiveness regarding the information model in ensuring sufficient consumer security against reckless financing techniques together with appropriate functioning of retail economic areas more generally speaking (Atamer 2011; Avgouleas 2009a; Domurath 2013; Garcia Porras and Van Boom 2012; Micklitz 2010; Nield 2012; Ramsay 2012). The report on the customer Credit Directive planned for 2019 provides the opportunity to reflect upon this problem.

The aim of this article is twofold against this background. First, it seeks to discover the problematic areas of credit rating supply into the post-crisis environment that is lending the EU. Next, it tries to evaluate as to what extent the 2008 Consumer Credit Directive is fit because of its purpose as far as the consumer protection against irresponsible lending practices is concerned today. The analysis commences by having a research associated with the basic concept of “responsible lending” within the context of consumer credit—that is, unsecured credit provided for individual, home, or domestic purposes. Building upon the contours regarding the idea of responsible financing who has emerged using this quest, along with the outcomes of the empirical research carried out by the writers, this article afterwards identifies the essential imminent reckless financing methods when you look at the credit areas over the EU and tentatively analyses their key drivers. Aside from the desk research, the empirical research included a few semi-structured interviews utilizing the representatives for the customer businesses and national competent authorities targeted at verifying the initial findings and acquiring more information on the problematic facets of credit, in both old and new Member States. Footnote 5 the content then proceeds to look at from what extent the buyer Credit Directive acceptably addresses the situation of reckless financing and analyses customer security criteria and their enforcement in the broader EU regulatory framework for credit. The latter also incorporates a quantity of horizontal EU measures, in specific the unjust Contract Terms Directive Footnote 6 and the Unfair Commercial techniques Directive. Footnote 7 This analysis reveals some important limits regarding the present EU framework that is regulatory credit rating, in specific compared to the buyer Credit Directive, in supplying sufficient customer security up against the reckless lending techniques previously identified. The writers conclude by providing tentative suggestions for enhancement and determining areas for further research.