Significantly more than a ten years following the outbreak of this international economic crisis, customers over the EU have already been increasing their degree of financial obligation with regards to both amount and value of credit rating services and products. The novel business practices of lenders aimed at finding new revenue sources, such as fees and charges on loans, and the innovative business models emerging in an increasingly digital marketplace, such as peer-to-peer lending among the reasons for this trend are the low interest rate environment. These developments provide brand brand brand new dangers to consumers and pose brand brand new challenges for regulators when it comes to how exactly to address them. This informative article aims to unearth the problematic components of credit rating supply when you look at the post-crisis lending environment across the EU and also to evaluate from what extent the 2008 credit rating Directive currently in effect, which aims to guarantee adequate customer security against reckless financing, is fit for the function today. The article explores the general meaning of вЂњresponsible lendingвЂќ with emphasis on consumer credit, identifies the most imminent irresponsible lending practices in the consumer credit markets, and tentatively analyses their key drivers in this context. In addition it reveals some essential limits for the customer Credit Directive in supplying consumer that is adequate against reckless lending and will be offering tentative strategies for enhancement. Into the writersвЂ™ view, enough time now appears ripe for striking another type of balance between use of credit and customer protection in European credit legislation.
Significantly more than a ten years following the outbreak for the worldwide financial meltdown, customers throughout the European Union (EU) have already been increasing their amount of debt with regards to both amount and value of credit items (European Banking Authority 2017, pp. 4, 8). One of the reasons behind this trend would be the low interest environment, the novel business techniques of lenders geared towards finding brand new income sources, such as for instance costs and costs on loans, therefore the revolutionary company models growing in an ever more electronic marketplace, such as for example peer-to-peer financing (P2PL) (European Banking Authority, 2017 pp. 4, 8). These developments provide new dangers to customers and pose brand brand new challenges for regulators when it comes to simple tips to deal with them. The difficulty of reckless credit lending deserves attention that is special this context. Such financing might cause unsustainable quantities of overindebtedness her response leading to major customer detriment. In addition, it might be troublesome into the functioning associated with the EUвЂ™s market that is single monetary solutions.
The main bit of EU legislation presently regulating the provision of credit rating вЂ“ the 2008 customer Credit Directive Footnote 1 вЂ“aims at assisting вЂњthe emergence of the well-functioning interior market in consumer creditвЂќ Footnote 2 and ensuring вЂњthat all customers ( вЂ¦ ) enjoy a top and comparable degree of security of these passions,вЂќ Footnote 3 in specific by preventing вЂњirresponsible financing.вЂќ Footnote 4 This directive, which goes to your pre-crisis duration, reflects the information and knowledge paradigm of customer security together with matching image of this consumer that isвЂњaverage being a fairly well-informed, observant and circumspect star (Cherednychenko 2014, p. 408; Domurath 2013). The concept behind this model would be to enhance the customer decision вЂ“ making process through the principles on information disclosure directed at redressing information asymmetries between credit organizations and credit intermediaries, regarding the one hand, and customers, on the other side. Especially in the aftermath of this economic crises, nevertheless, severe issues have now been raised concerning the effectiveness associated with information model in ensuring consumer that is adequate against reckless financing techniques and also the appropriate functioning of retail economic areas more generally speaking (Atamer 2011; Avgouleas 2009a; Domurath 2013; Garcia Porras and Van Boom 2012; Micklitz 2010; Nield 2012; Ramsay 2012). The overview of the customer Credit Directive planned for 2019 provides the opportunity to mirror upon this problem.
The aim of this article is twofold against this background. First, it seeks to discover the problematic areas of consumer credit supply when you look at the post-crisis lending environment across the EU. Next, it tries to assess as to the extent the 2008 credit rating Directive is fit for the function today as far as the customer security against irresponsible lending methods can be involved. The analysis commences with a research associated with basic concept of вЂњresponsible lendingвЂќ within the context of consumer creditвЂ”that is, unsecured credit given to individual, home, or domestic purposes. Building upon the contours associated with the idea of accountable financing which has emerged with this quest, plus the link between the empirical research carried out by the writers, the content afterwards identifies the absolute most imminent reckless financing techniques when you look at the credit rating areas over the EU and tentatively analyses their key motorists. The empirical study involved several semi-structured interviews with the representatives of the consumer organizations and national competent authorities aimed at verifying the preliminary findings and obtaining further information on the problematic aspects of consumer credit, both in old and new Member States in addition to the desk research. Footnote 5 the content then proceeds to examine from what extent the buyer Credit Directive acceptably addresses the issue of reckless financing and analyses customer security requirements and their enforcement inside the broader EU regulatory framework for credit rating. The latter also incorporates a quantity of horizontal EU measures, in particular the unjust Contract Terms Directive Footnote 6 and the Unfair Commercial techniques Directive. Footnote 7 This analysis reveals some crucial restrictions regarding the present EU framework that is regulatory credit rating, in particular compared to the customer Credit Directive, in supplying sufficient customer protection up against the reckless financing practices previously identified. The authors conclude by providing tentative tips for enhancement and distinguishing areas for further research.