The future European directive will protect consumer credit

Europe to the rescue of the Spanish consumer.

Thomas Osborne
Thomas Osborne
31 July 2022 Sunday 22:54
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The future European directive will protect consumer credit

Europe to the rescue of the Spanish consumer. The future European consumer credit directive, whose new version is being processed between the European Commission, the Council of the EU and the European Parliament with several amendments, aims to cover up many evils. The search for greater protection, security and transparency would translate into a better outlook for the client, even in low-amount loans or buy now, pay later (buy now, pay later).

“The current directive has not created problems, it is working. But there are objectives that it has not achieved, such as creating a cross-border consumer credit market, ”explains Ignacio Pla, general secretary of the National Association of Financial Credit Establishments (Asnef). That a German can request financing from a Norwegian company to buy a car in France, to give examples. Although it is promoted, it will continue to be a challenge, because "each country has its idiosyncrasies" and way of seeing consumption and credit. In addition, databases must be accessed to assess risks, such as customer default, which requires the establishment of common tools. If achieved, it would increase competition, supply and improve conditions for the client. The other point to improve is how the financing of electronic commerce is regulated, adds Ignacio Pla.

In addition, it seeks to facilitate processes. “Transparency when properly informing the consumer is a priority. The lack of information surrounding the marketing of certain products, such as revolving cards or mini-credits, is worrying”, criticizes Patricia Suárez, president of the Association of financial users (Asufin). What does the revision of the directive propose? Less fine print to make everything clearer. “Consumer credit is not a complex product, but if we flood the client with pre-contractual information, in the end we end up misinforming him. It becomes so much that it is possible that the client is overwhelmed and does not read even the essentials”, believes Pla. For this reason, it is requested that amounts, return terms, fees, charges be made clear "in a clear, simple and visual way". In the quest for more transparency in e-commerce, this would have to fit on the screen from which it is navigated.

In Asnef they also highlight the need to reserve the financing activity to companies registered in a registry since "in Spain anyone can do it". They calculate that "there are more than 600 companies" in the fintech sector that lend outside the control of official bodies (Bank of Spain, CNMV, DGSFP). “They come to leave money at exorbitant rates without complying with the directive or evaluating the solvency of the clients. They don't have a supervisor to monitor and fine them,” says Pla. His APR reaches 2,800%, he details.

The current reform proposal includes the registration and supervision of non-credit entities. It is a key aspect, it is stated, because intrusion ends up causing excessive indebtedness in families, since they access financing that, through the regulated channel, would be rejected when studying their profile. "If all this is carried out properly, we will avoid a good part of the claims and subsequent litigation," believes Suárez. In any case, you will have to be patient. “Going fast, it will move to Spain in 3 or 4 years”, calculates Pla. "When it comes to its transposition, it should be done avoiding the delays to which the different governments have accustomed us," they reproach Asufin.