ARTICLE...
Consumer Credit Directive
The UK is leading the way in terms of protective consumer credit legislation, though the European Union has now somewhat reduced this protection through the Consumer Credit Directive (CCD).
Following a rise in cross-border transactions, particularly with the launch of internet shopping, a review by the European Commission 2001 called for a new directive to harmonise the differing laws within the Member States in order to improve the credit market.
The first thing to note is that the CCD is not, in the most part, retrospective and therefore only applies to agreements made after 12 May 2010. It is also worth noting that the UK cannot allow legislation to stay in place which gives further protection than the Directive, therefore most of the Consumer Credit Act will have to be repealed.
The role of implementing the Directive into UK law falls on BERR. Astonishingly a consultation has not taken place until April 2009, the results of which will be communicated in the form of the final legislation in November 2009. This gives creditors only six months to overhaul their systems to become compliant. Despite the importance of the legislation the strict timeline of May 2010 gives the government little choice but to take this action. Due to EU rules there is absolutely no option of extending the implementation deadline.
So what does the CCD actually change? Well, for starters, when it is read in conjunction with our current consumer legislation it becomes complicated to ascertain which provision to apply. The reason for this is that Directive only applies to agreements between €200 and €75,000 and made after 12 May 2010. Our own CCA would apply for agreements up to €200 and over €75,000 if made after 12 May 2010 and any agreement made between 6 April 2008 and 12 May 2010. It would also apply to agreements for less than £25,000 made before 6 April 2008 and business loans (where the business falls within the definition of individual within the act) of less than £25,000 whenever entered. However, BERR may choose to amend consumer law to bring business and other agreements in line with the directive.
The CCD consultation is open until 10 June. The reason for the consultation is that there are a number of opt-outs built within the Directive. BERR can also choose to apply the directive to agreements outside of the CCD scope. These include Business Loans, Secured Lending, Hire, Leasing and Hire-Purchase Agreements. The current thinking is that all agreements caught by the CCA but not the CCD (with the exception of second charge mortgages). Doing this would help keep the legislation less complex. However, certain information may not have to be given for business loans or loans over €75,000. This is discussed within the consultation.
The post contract information requirements brought in by the CCA 2006 would be amended so that a different type of statement would have to be produced for overdrafts. The statement differs in terms of the information that needs to be included. The statement must include the period to which the statement relates, the amounts and dates of drawdowns, the balance from the previous statement, and the date thereof, the new balance, the dates and amounts of payments made by the consumer, the borrowing rate applied, where applicable, the minimum amount to be paid and any increases of the borrowing rate.
Since agreements will now have to be drawn up for overdrafts should you receive a request for a copy agreement for an overdraft executed after 12 May 2010 you will need to provide it.
Another point to consider is that where the creditors' rights have been assigned to a third party (debt purchase) it is now a right under the Directive for the consumer to be able to plead against the assignee any defence which was available to him against the original creditor. The consumer must also be informed of the assignment. BERR plan to create a new regulation to cover the requirement which will apply across all consumer credit agreements, both old and new! Again, this is raised in the consultation.
You can view the Consultation as well as the CSA's Consultation breakdown by visiting the lobbying section of the members' only section of the CSA and DBSG websites.
The good news is the CCD will be reviewed in 2013 and every fifth year after that!
Original article courtesy of DBSG. For further information visit www.dbsg-uk.com/dbsg
