Consumer Credit Directive
The Consumer Credit Directive (Directive 2008/48/EC on credit agreements for consumers) was adopted on 23 April 2008. Member States had to transpose it into national law before 12 May 2010.
The Consumer Credit Directive aims at fostering the integration of the consumer credit market in the EU and ensuring a high level of consumer protection by focusing on transparency and consumer rights.
It stipulates that a comprehensible set of information should be given to consumers in good time, before the contract is concluded and also as part of the credit agreement. In order to allow consumers to compare more easily the various offers and to better understand the information provided, creditors have to provide pre-contractual information in a standardised form (Standard European Consumer Credit Information). Moreover, they will also provide consumers with the Annual Percentage Rate of Charge (“APR”), which is a single figure, harmonised at EU level, representing the total cost of the credit. Directive 2011/90/EU has amended the assumptions for its calculation.
In addition, the Consumer Credit Directive grants two essential rights to consumers: they are allowed to withdraw from the credit agreement without giving any reason within a period of 14 days after the conclusion of the contract; and they have the possibility to repay their credit early at any time – in this case, the creditor can ask for a fair and objectively justified compensation.
Report on the implementation of the Consumer Credit Directive (May 2014)
The Commission is required to prepare every five years a report on the implementation of the Directive, and in particular assess the relevance of thresholds applied in the Directive and the percentages used for the compensation payable in the event of early repayment. The Commission has also the duty of monitoring the effects of existence of regulatory choices available to the Member States.
In this context, the Commission adopted on 14 may 2014 the Report on the implementation of the Directive
The main conclusion of the Report is that creditors should make further efforts to ensure that rights given to EU citizens by the Directive are respected. Amongst the rights demanding follow-up action are those regulating advertisements and pre-contractual information: creditors do not always inform consumers about their rights, such as the right to withdraw from the contract within 14 days and the right of early repayment.
However, some Member States were late in putting the legislation into practice and creditors had less time to adjust their business practices to the provisions of the Directive. At this stage the European Commission will focus on raising awareness among consumers and creditors of their rights and obligations and surveying their correct application and enforcement. This is in particular important for vulnerable consumers facing economic difficulties and using short term high interest loans.
The Report is based on the results of two studies carried out by external consultants:
- Study on the functioning of the consumer credit market in Europe
- Study on the Impact of the Legal Choices of the Member States and other Aspects of Implementing the Directive 2008/48/EC on the Functioning of the Consumer Credit Marketing the European Union
- Executive summary of the study on the Impact of the Legal Choices
Calculation of the Annual Percentage Rate ("APR")
Directive 2011/90/EU amends the assumptions for the calculation of the APR to reflect more accurately the products sold on the market.
A simulator based on these revised assumptions allows to calculate APR for pre-defined examples and also for the terms of the contract as defined by the user. It is in line with the European legislation as from 1 January 2013.
This Excel simulator have been produced by outside contractors for DG Health and Consumers and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's or the Health and Consumers DG's views. The European Commission does not guarantee the accuracy of the data included in the report and simulator, nor does it accept responsibility for any use made there.
To help Member States to correctly apply the Consumer Credit Directive, the Commission published on 8 May 2012 "Guidelines on the application of the Directive 2008/48/EC in relation to costs and the Annual Percentage Rate of charge". The Guidelines provide comprehensive explanations how to delineate the total cost of credit, in particular to be included in the calculation of APR, and how to apply assumptions as amended by the Directive 2011/90/EU.
In 2009 the Commission conducted a study examining the examples used to demonstrate the practical application of the APR in relation to consumer credit. See Terms of Reference .
The version of the Report below was made coherent with the changes in the assumptions for the calculation of the APR introduced by the Directive 2011/90/EU. It is also coherent with "Guidelines on the application of the Directive 2008/48/EC in relation to costs and the Annual Percentage Rate of charge".
These reports have been produced by outside contractors for the Commission and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's views. The European Commission does not guarantee the accuracy of the data included in the report and simulator, nor does it accept responsibility for any use made thereof.