Updated: October 2020
Simplification of information
Consumer credit is normally partially executed through the granting of a handful of small operations to
consumers. Those operations are of limited complexity and – in comparison to mortgage credit – of small
amounts, but are, in turn, regulated by considerably complex rules.
As an example of that, the CCD requires creditors to give excessively detailed information to the consumer
prior to entering a consumer credit agreement. Nonetheless, consumers ignore information which is too
complex or difficult to remember and there is evidence that simpler information with fewer figures is much
more effective at landing critical messages. That information may refer to information that only reflects the
specifics of the product and meets with client’s expectations for short and clear information – for example
– the repayment periods, the amount of the repayment instalments and the applicable interest rate.
Reduction of information
Regarding the pre-contractual information, it is important to focus on diminishing the number of precontractual documents, which banks are obliged to serve to consumers in any case. This approach has
not proved itself to be useful for consumers and for that reason the requirements for serving precontractual information and Standard European Consumer Credit Information aren’t helping in achieving
the objectives of the Directive. Bearing digitalisation in mind, the required information can barely be
presented in a clear and comprehensive way on mobile devices.
A critical look should also be taken at the amount of mandatory information to be included in the credit
agreements themselves. From the consumer’s point of view, the agreement should contain only what is
necessary, i.e. in addition to the total amount of credit, above all the repayment plan, the default interest
rate and information about the typical consequences for the borrower during the performance of the
contract (consequences of overdue payments, rights of withdrawal, early repayment conditions).
The reduction of information may be also observed through the role of the right of withdrawal. The right
of withdrawal is an instrument for the consumer’s protection and when it is granted to the consumer it
should diminish some of the requirements for the service providers, especially in the field of the pre-contractual
information that needs to be provided to consumers. If the amount of information is not diminished,
there is not a substantial meaning of the right of withdrawal.
Regulate activities rather than institutions
In ESBG’s opinion, gold plating practices in the implementation of the CCD by Member States have limited
its effectiveness. The use of innovative technologies has prompted the arrival of new operators to the
consumer credit market. Unregulated entities can take advantage of the consumer trust that regulated
entities have gained through the years, and even put that trust at risk if they fail to deliver fair and
transparent results, increasing regulated entities’ reputational risk. Therefore, a strict implementation of the
CCD by all Member States would give consumers better visibility on their level of protection in Europe. In
this sense, the CCD should regulate that consumer credit activity should be a reserved activity and should
require the application of policies on responsible lending, transparency and customer protection. Any
revision to the CCD should be based on the principle “same activity, same rules”.
Creditworthiness assessment requirements should be flexible and preserved for each Member State and
each credit institution. There is no need for harmonisation.
In our view an effective creditworthiness assessment can’t be standardised, because of the following nonexhaustive reasons:
it should be based on the knowledge of the borrower and on the ability to take into account the
specificities of his situation, not on a mechanically applied criterion. This knowledge - inherent to the
banker's job - can’t be standardised.
standardising the assessment of risk profile would block the market without taking into consideration
the peculiarities of each Member State.
it also may lead to a legal risk of not being able to deny credit if the European criteria are met.
common indicators wouldn’t allow to take into consideration the economic and cultural background:
the same indicators will not necessarily mean the same in different countries (e.g.: savings habits,
national rates of divorce, cost of education for children).
The CCD evaluation has so far looked at the relationship between the needs and problems in society and the
objectives of the Directive.
However, more importantly for us is the impact that digitalisation has had on consumer credit. The emergence
of a variety of new technologies has commanded the development of the digital transformation in the
commercial and corporate aspects of banking. It is easy to observe a significant upward trend in the budget
share dedicated to R&D.
However, the CCD did not anticipate that technological disruption, and new digital means have brought a
diverse set of innovative distribution channels, and along with them, new communication means, new ways
to access credit and the uniformity of credit agreements.
The use of smartphones, tablets, computers, headsets, and other devices, for not only searching products,
but also for entering into credit agreements, is a reflection of the reality that has exceeded the expectations
considered by the legislators when agreeing the CCD.
In this regard, special attention needs to be paid to the information to be provided to consumers before
entering into the credit agreement. In some Member States, particular attention must be paid to the actual
conclusion of the credit agreement when using these devices. Art. 10 (1) CCD, in which the text form of credit
agreements is standardised as sufficient, should be harmonised to a maximum in the future, in order to enable
a digital conclusion. At present, many Member States have adopted stricter rules (e.g. written form),
representing a real barrier for the single market. In our view, in order to adjust the already adopted measures
to the new digital technologies it is necessary to assess how much detailed information is required and how
it can best be provided to consumers.
We have noticed that new market players such as crowdfunding platforms or SMS loan-providers have not
yet played such a major role in the area of consumer loans. Nevertheless, we see a tendency for this role to
increase in the future and for considerable changes to be expected in consumer loans as well.
consumers want to receive clear and manageable information in a short time.
it is important not to overburden the consumers
its requirements should be suitable for new
technology and distribution channels.
a clear balance should be created between the
objectives of the Directive and the rights of the