Greater choice and better prices expected as EU consumer credit market is unified.
If you have ever bought a washing machine or a TV in the sales or used a credit option offered by a retail store, you might be intrigued to know that credit costs vary depending on where you are in Europe. Consumer credit rates differ by as much as 6 percentage points depending on the country. While consumers in Finland pay only 6.3% for their loans, in Portugal you pay 12.2%. The EU is now acting to level the playing field.
The consumer credit law, approved by the European parliament on 16 January, brings the benefits of Europe's single market to retail financial services. Consumers will now be able to shop around for the best offer from banks and credit companies in other EU countries.
Transparency and consumer rights will become the new order of the day as credit advertising is required to provide the same essential information Europe-wide. It will thus be easier to compare details such as interest rates and charges for defaulting. A standard form will be used throughout the EU to clearly show the cost of the loan.
Once you have signed a contract, you will still have 14 days to cancel if you change your mind. This will bring new rights to almost half of the EU. Consumers will no longer be penalised for making a hasty decision under pressure. And lenders will become more competitive as they strive to dissuade consumers from taking their business elsewhere.
The new legislation covers loans from €200 to €75 000. It does not cover mortgages and charge cards. The lower limit was set to cover quick loans made by mobile phone text messages. This practice, which means money can be transferred to the borrower within 15 minutes, is on the rise and is particularly popular in Sweden and Estonia.