EU directive to benefit credit card borrowers
European Union consumers are set to benefit from lower penalty fees and interest rates under the EU consumer credit directive, which is expected to be approved by MEPs this week.
The new law aims to open the €800 billion (£600 billion) consumer credit market to cross-border competition.
Lenders will have to provide standardised information about annual percentage rates, for example, so that borrowers will find it simple to switch from a lender in their home country to one in any of the EU’s 26 member states.
Currently, cross-border agreements account for less than 1% of the market, however this figure could rise substantially under the new rules, because interest rates in the eurozone start as low as 6.3%, in Finland.
The EU directive will be applied to loans from €200 up to €75,000 and will not apply to mortgages, equity releases, charge cards or overdrafts.
BEUC, the consumer group that covers pan-European issues, has called the measures too narrow and is particularly concerned that provisions on early repayment are too vague and could therefore leave borrowers with no early repayment option.
According to the latest figures, outstanding consumer credit per person ranges from over €3,000 in the UK and Republic of Ireland to less than €100 in Slovenia.