Customer protection

Proposed Solutions and Actions

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).

Identified Concerns

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.

Why Policymakers Should Act

We fully support the principles of the CCD, but we believe that it is reasonable to measure the objectives of the Directive having in mind that:
consumers want to receive clear and manageable information in a short time.

  • it is important not to overburden the consumers with information.
  • 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 creditors.​

Background

The EU Consumer Credit Directive (CCD) is designed to strengthen consumer rights and help potential customers make an informed choice when signing up to a credit agreement. Lenders provide standardised information on the product, allowing clear comparison by the consumer with other products available to them. In addition, lenders provide detailed information on the annual percentage rate of change; including the total cost of the credit.

The EU CCD was finalised in 2008. In 2011, an annex was added to clarify the rules on calculating the Annual Percentage Rate of Charge (APR). Finally, in 2014 a report was published in the Implementation of the directive. In 2019, the European Commission launched a consultation on the evaluation of the CCD, following on from an evaluation and fitness check roadmap. The review – still ongoing – aims to assess the effectiveness, efficiency, coherence, relevance and EU added value of the Consumer Credit Directive.​

related


Considerations on the BCBS principles for the management & supervision of climate-related financial risks

The Basel Committee on Banking Supervision (BCBS) has published a public consultation on principles for the effective management and supervision of climate-related financial risks. The document forms part of the Committee’s holistic approach to address climate-related financial risks to the global banking system and aims to promote a principles-based approach to improving both banks’ risk management and supervisors’ practices in this area. This new position paper based on our response to the consultation.

related


Clear and fair rules for the use of machine learning in Internal Rating Based models

The European Savings and Retail Banking Group (ESBG) welcomes the initiative of the European Banking Authority (EBA) to discuss the implications of the use of machine learning (ML) in the internal rating based (IRB) models for credit risk.

We encourage the EBA to build a clear and fair supervisory scheme that goes further and allows compliance with the proposed principles to be measured, and that finds the balance between the advantages and the new risks that machine learning brings.

related


Proportional and clear guidelines would ensure citizens' data protection and foster innovation

The ESBG, together with eight other associations representing the EU payment sector, has written to the European Data Protection Board, the European Commission and the European Banking Authority about the EDPB Guidelines 06/2020 on the interplay between the reviewed Payment Services Directive (PSD2) and the General Data Protection Regulator(GDPR).

The letter highlights that while the payments sector remains fully committed to ensuring the protection of EU citizen’s data- including within the framework of PSD2 – there are concerns that the enforcement of the Guidelines will lead to an outcome that is not in line with PSD2 objectives. In the end, this would hinder innovation and competition in payments.

Although the final Guidelines help in clarifying certain aspects of the interplay, our letter emphasises and reiterates common concerns:

  • Provisions on data minimization create uncertainties and are potentially in conflict with PSD2;
  • There is lack of coherence with the Regulatory Technical Standards on Strong Customer Authentication and Common and Secure Communication (RTS on SCA & CSC);
  • Financial transaction data should not be considered as special category of personal data (SCPD). As such, if financial transaction data is not processed in order to infer SCPD, Article 9(1) GDPR should not apply.
  • There are resulting concerns that national Data Protection Authorities could start taking a differentiated approach to the interpretation of the provisions, resulting in fragmentation across the EU and adding to a growing trend when it comes to GDPR implementation.

Overall, the EU payments industry welcomes further discussion between all relevant institutions and stakeholders in the GDPR-PSD2 ecosystem to address these challenges and to provide legal certainty for all actors to enable them to meet their obligations and continue to provide top-tier services for their customers.

READ THE FULL JOINT LETTER

related


ESBG welcomes the financial competence framework by the European Commission and OECD

ESBG Managing Director, Peter Simon, shares the vast experience of European Savings and Retail Banks on financial education during panel discussion.

BRUSSELS, 25 January 2022 – The European Savings and Retail Banking Group (ESBG) applauds and welcomes the ‘Financial competence framework for adults in the European Union’ launched today by the European Commission (EC) and the OECD’s International Network on Financial Education (INFE).

“This framework provides much needed guidance to ensure citizens are prepared to make sound financial decisions that help them prosper and build resilience across all Member States”, said ESBG Managing Director, Peter Simon, who participated in a panel discussion to launch the initiative.

“Building financial education and literacy is part of European Savings and Retail Bank’s DNA and history, who have been carrying out for decades a number of different financial education programmes with the greatest dedication. Together with our members, ESBG can only celebrate an initiative from the public sector that aims at the same goal, which is to empower citizens to make the right choices for their financial well-being”, he added. “We all need to work together”.

In particular, ESBG applauds the fact that this framework, which includes 563 personal finance competences, focuses not only on building knowledge but also skills across all age groups.

The framework builds on the OECD’s existing one, updating it to the EU context and enriching it with more detailed digital and sustainable finance competences. It is made available for voluntary uptake in the EU by public authorities, private bodies and the civil society.

It was published on 11 January and launched today on a virtual event by European Commissioner Mairead McGuinness, and OECD Secretary General, Mathias Cormann. The announcement was followed by a panel discussion with industry experts.

WATCH THE RECORDING OF THE PANEL DISCUSSION

related


Conference on cyber security in banks

Cyber security and fighting cyber crime are among the top concerns for all banks across the globe.

News on identity and data theft, various cyber-attacks, security breaches resulting in large losses, make regular headlines. The global pandemic has further increased cyber risks as criminals attack mobile phones, notebooks and PCs used for communication between home and main office. Are we ready for the challenges? Banks are spending substantial amounts to prevent ICT and cyber security breaches and improve their defenses against cyber risks.​

During the conference a panel of excellent speakers will describe the latest threats and how to deal with them, introduce state-of-the-art solutions in malware detection, firewalling, intrusion prevention, fraud detection, incident response and other defensive techniques.


"It's the labour supply, stupid"

The coronavirus (COVID-19) shock affected some demographic groups’ labour force participation rate differently from what past cyclicality would suggest.

Guest Speaker

Edward Scicluna is Governor of the Central Bank of Malta and Deputy Chairman of the Malta Financial Services Authority, after having served as Malta’s Minister for Finance (2013-2020). He also served as an MEP and Vice-Charmain of ECON (2008-2013). His previous appointments included that of Professor and Head of the Department of Economics at the University of Malta (UoM), and Chairman of the MCESD. Edward graduated from the University of Oxford with a Diploma with distinction in politics and economics; from the UoM with a First Class Honours BA degree. He read for his Masters and Doctorate in Economics at the University of Toronto.

About the topic

​The coronavirus (COVID-19) shock affected some demographic groups’ labour force participation rate differently from what past cyclicality would suggest. The assessment, however, depends on the counterfactual scenario used, i.e. the assumption of what would have happened in the absence of the pandemic shock. Using counterfactual scenarios that take the pre-pandemic trends into consideration, the labour force participation rate gap – i.e. the difference between the observed labour force participation and the no-pandemic-shock counterfactual – is the widest for older workers and for workers with lower and…(click to read more)

Programme

14h30 – Welcome, short introduction by ESBG of the topic and the guest speaker

14h35 – Guest speaker’s presentation

15h00 – Q&A moderated by Sebastian Stodulka, ESBG Head of Regulatory Affairs

15h15 – Closure

About ESBG

The European Savings and Retail Banking Group (ESBG) has 23 members in 18 countries. As some of its members are national organisations, ESBG represents the interests of over 800 banks working responsibly and closely with their communities and SMEs. Together, ESBG members manage assets worth €5,700 billion, serve 162 million Europeans and employ nearly 660,000 people.

About the Central Bank of Malta

The Central Bank of Malta is the central bank of the Republic of Malta. It was established on 17 April 1968. In May 2004, when Malta joined the European Union, it became an integral part of the European System of Central Banks.


WSBI ESBG Events


Daisy chain of internal MREL

The “daisy chain” deduction framework increases the necessity of legal certainty, predictability, and proportionality in the internal MREL (iMREL) regulation.

Resolution groups with entities in only one member state should be exempted from the “daisy chain” deduction framework. The transitional period for applying the requirements should also be extended to 1 January 2024. Moreover, ESBG warns that the introduction of the “daisy chain” proposed by the European Commission in late October should explicitly not increase other prudential requirements for banks. Finally, the scope of application of iMREL should be fixed at 5% of Total Risk Exposure Amount (TREA) for non-resolution entities in the level 1 text and not left at the discretion of the Single Resolution Board (SRB) as is currently the case.

related


Dominique Goursolle

ESBG elects Dominique Goursolle-Nouhaud as new president

The first woman president of the European Savings and Retail Banking Group (ESBG) is Dominique Goursolle-Nouhaud, president of the National Federation of French Savings Banks. She was elected today by the ESBG General Assembly for a period ending in 2024.

Dominique Goursolle-Nouhaud was elected today as president of the European Savings and Retail Banking Group (ESBG) for a three-year term. She is the first woman to occupy the position. She succeeds Helmut Schleweis, president of the German Savings Banks Association.

Together with ESBG members, Dominique Goursolle-Nouhaud will represent the specific model of savings banks, cooperative and retail banks at the European level. She is committed to showcase the social and economic contributions of the ESBG members to their communities.

She is committed to ensure that the specificities of the business model of the ESBG members are considered by EU policymakers. With ESBG, she will stand for a proportional application of regulation and supervision.

“We must defend the added value of our model”, said Dominique Goursolle-Nouhaud as she was elected. “Our strength today is to remain united to rise to the challenges of tomorrow. Let’s be stronger together”.

The members of the ESBG president committee are:

Isidro Fainé, president of CECA (Confederación Española de Cajas de Ahorros);
Helmut Schleweis, president of the German Savings Banks Association (Deutscher Sparkassen- und Giroverband);
Jens Henriksson, president and CEO of Swedbank;
Gabriele Semmelrock-Werzer, president of the Austrian Savings Banks Association (Österreichischer Sparkassenverband); and
Gerhard Brandstätter, Chairman of Cassa di Risparmio di Bolzano SpA.

About the National Federation of French Savings Banks

The National Federation of French Savings Banks (Fédération nationale des Caisses d’Epargne) is the body that represents 15 savings banks and regional cooperative banks, as well as their 4.5 million members and 2,600 elected representatives. Its main missions are to coordinate and strengthen the relation between the savings banks and their members/customers; to represent their common interests, in particular towards the public authorities; to support and train the elected representatives of the members; to define, coordinate and promote the social and environmental responsibility actions of the savings banks.

About ESBG

The European Savings and Retail Banking Group (ESBG) has 23 members in 18 countries. As some of its members are national organisations, ESBG represents the interests of over 800 banks working responsibly and closely with their communities and SMEs. Together, ESBG members manage assets worth €5,700 billion, serve 162 million Europeans and employ nearly 660,000 people.

related