European Union set to shake up consumer credit market
Europe is poised to make it easier for people looking for consumer credit to shop all over the continent for the best deal with a key vote at the EU parliament.
EU lawmakers are due to vote on plans to make it easier to compare terms and rates of loans across the European Union in hope of boosting competition in the EU's €800 billion ($1.2 trillion) consumer credit market. "We need to seize this opportunity to move forward," EU Consumer Commissioner Meglena Kuneva stressed on Tuesday during a debate at the European Parliament before the vote. "It's clear that the status quo is not working. The figures speak for themselves," she added.
Currently, average consumer credit interest rates vary widely across the 27-nation bloc from as low as six percent in Finland to as high as 12% in Portugal, Kuneva lamented. Under the new rules, lenders will have to make all key facts amd figures about a consumer loan available to a prospective client presented in a standard format across the region.
In addition to requiring greater transparency, the plans also aim to increase the rights consumers have when they contract such loans, which are often used for things such as holidays or cars. Consumers would be able to pull out of a loan without having to justify why or pay an additional fee and they would be able to repay a loan early at any time.
"Above all, we want a well regulated market where consumers feel confident in accessing that market," conservative British EU lawmaker Malcom Harbour told the assembly. "Good regulation actually encourages market activity." Credit markets have been in the focus in recent months as the financial service industry struggles to cope with the far-reaching consequences of the meltdown in the high-risk home loan market in the United States.
"Credit is going to be a difficult issue for the foreseeable issue, difficult for borrowers and legislators alike," said British Liberal MEP Diana Wallis. "We need to do something to stimulate the EU market in financial services," she added.
If EU lawmakers approve the package, it will still need to be rubberstamped by EU governments before it can take effect.