SPEECH/08/11
Meglena Kuneva
European Commissioner for Consumer Protection "Consumer Credit"
Speech at the European Parliament Strasbourg, January 15th 2008
1. The vote in this house on wednesday on the consumer credit directive is a very important moment for europe's 500 million consumers
It will directly affect many people's lives.
It is about two critically important issues.
1. It is about consumers being able to make better informed choices when they take out credit loans – to pay for a family wedding, a washing machine or a new car.
2. And it is about consumers getting more choice and more competitive market.
It is also a very important vote for business - creating a single, simple framework of rules so banks and other creditors can do business more easily cross border.
We need to seize this opportunity to move forwards.
2. It is clear that the status quo is not working
The figures speak for themselves.
In Europe, the average consumer credit interest rate vary from around 6% in Finland, the cheapest Member State, to over 12% in Portugal!
In Italy, credit rates are about 9.4 percent, in Ireland about 6.8 per cent.
Europe's consumer credit market is fragmented – broken down into 27 national "mini markets".
And in a European credit market worth €800 billion, - direct cross border financial services make up only at tiny fraction - 1% percent of all distance credit transactions!
Clearly, the internal market is not functioning. Clearly competition at EU-level is not functioning.
The result is that consumers are being denied choice and more competitive offers. And competitive business is being denied opportunities to access new markets.
3. This consumer credit directive is necessary to start to break open the potential of the internal market and boost competition and choice
There are two main aims of the Consumer Credit Directive - – to provide standard, comparable information to consumers to a make informed choices. And to give business and single set of standards to sell competitive credit offers cross borders.
The Consumer Credit Directive focuses on transparency and consumer rights.
I will highlight just few of the important common elements it puts in place
On advertising for credit loans. If there is a figure in an advertisement on credit, it will be mandatory to provide the same standard list of essential information, all over the EU. Most importantly, for the first time the Annual Percentage Rate of charge, will be calculated in the same way across the European Union – this is a very significant step forwards so consumers can see the real cost of credit using one single figure. On pre-contractual information. Information given to consumers for credit offers will be presented in the same standard credit information form across the EU with all the key facts and figures - from interest rates, to information on charges and linked insurances. This will allow consumers to make a direct comparison between different offers presented in a standard comparable way.
The Directive also sets out two essential rights for consumers:
Once they have concluded a credit contract, consumers will be able to withdraw from the credit without having to give any reason, and without any charge. This right (a new feature in almost half of the Member States) will apply to all consumer credits in the EU. In addition, the Consumer Credit Directive confirms the consumer's right to switch - with a right to repay early at any time. This is a critically important issue for the Commission – to ensure fair compensation to banks and at the same time to safeguard the consumer's right to make a free choice to move a loan to a more competitive offer on the market. This is essential if competition is to thrive.
President, Honourable Members,
I fully recognise that harmonising legislation in this very sensitive area is not an easy task.
But I am convinced that markets are made by people and should be made to work for people.
And I believe that we, in Europe, are in the business of putting people at the centre of the market.
Giving people the power to choose. Giving businesses the power to compete. Getting the European market to work for consumers,
I want to emphasise that in the modern world it is not about pitching consumers against business – but building healthy markets where consumers can choose and business can compete.
I believe that the amendments put forward by the PSE and the ALDE groups – with which the Council has agreed – constitute a fair and reasonable compromise.
In my opinion, this is the best option in the interest of both consumers and financial services providers.
I believe that a vote for this compromise package is a vote
for competitive markets for clear information for more informed consumer choice
It is a modest beginning on the consumer dimension of financial services where much needs to be done.
So I look to the Members of this House
You speak directly on behalf of Europe's citizens, You have fought for so many years for the things that really matter to people in their daily lives
to vote to support an agreement today on credit rules that will provide real added value to Europe's citizens in that space where they live their lives.
And to send a clear signal of Europe's willingness to "roll up our sleeves" and work in an area that greatly concerns our citizens and businesses – large and small – at present.
Thank you.
