21 May 2007

Council agreement on Consumer Credit

The Competitive Council reached, by qualified majority, a political agreement on the Commission's modified proposal for a directive on credit agreements for consumers. The Council will adopt its common position at one of its forthcoming meetings after finalisation of the text and forward it to the European Parliament for a second reading in the framework of the co-decision procedure. The discussion in the Council mainly focused on article 15 of the compromise text which deals with the issue of early repayments.

Negotiations within the Council have been focussed in the following five main areas: 1) standard information for advertising, 2) pre-contractual information and contractual information to be included in credit agreements, 3) right of withdrawal, 4) early repayment of the credit and the creditor’s right to compensation and 5) the calculation of the annual percentage rate of charge (APR).

Delegations of the Netherlands and Greece voted against the compromise text, Belgium and Luxembourg abstained.

The Council's compromise text grants creditors a limited right to compensation for early repayment of the credit. This compensation should, however, apply only for fixed interest rate credits and, where the reference interest rate is lower at the time of the early repayment than at the time of conclusion of the credit agreement. The reference interest rate is now defined in the compromise text as the interest rate that the European Central Bank or the central banks of the Member States apply to their most recent main refinancing operation.

Furthermore, Member States will have the right to provide that the compensation for the early repayment can be claimed by the creditor only on the condition that the amount of repayment within 12 months exceeds a threshold defined by Member States. When fixing the threshold, which should not be higher than EUR 10,000 Member States will take into account, for instance, the average amount of consumer credits in their market.

Council Compromise
Finish amendment not included.
Council press release

© Graham Bishop