Consumers' lending in the European Union

I Introduction to Consumers’ Lending in the EU Member States

Consumers’ lending is a companion and an integral part of the modern society as well as one of the most significant financial services in modern economies.1 Because of that, consumer credit has a number of economic, legal and social aspects. By improving production and consumption, consumer credit has contributed to raising the standard of living and economic prosperity of the society.2 The highest percentage of consumer loans in the structure of private consumption and gross domestic product was recorded in the most developed countries.3 The European Union has been trying to establish an equal level of consumer protection4 among the Member States5. The economic crisis and the instability of the financial market have recently brought to many new ways of consumers’ crediting 6, whereby differences in the regulations of consumers’ protection among the Member States of the European Union came to the fore as a bad impact to the common market within its borders7. Aiming to further harmonization of the legal frameworks in this area and to strengthen business competitiveness, the European Parliament and the Council have brought a new legal framework for consumer credit in the Member States of the European Union8. By this directive, the European Union amended 800 billion EUR worth market and enabled all the consumers from the European

Union to have the same rights in respect of credit arrangements and gave them the ability to compare credit terms all over the common market9.

The Directive 2008/48/EZ of the European Parliament and of the Council of 23rd April 2008 on the consumer credit contracts10 is effective from 11th June 2008 and by its adoption the Directive 87/102/EEC 11was repealed; it referred to the approximation of laws, regulations and administrative provisions of the Member States concerning consumer credit of 22nd December 1986 (hereinafter: the Directive 87/102/EEC)12. The Member States were obliged to implement a new directive into their legislations within two years (till 12th May 2010) with the aim of responsible lending and consumers’ financial protection and strengthening of consumers’ trust13. The Directive brought numerous changes related to consumers’ protection and it also stipulated the obligation to publish regulations by which its provisions were implemented into a specific national law.14

• II.    The Directive 2008/48/EC on Contracts of Consumer Credit

  As it had been mentioned earlier, the Directive 2008/48/EC of the European Parliament and of the Council of 23^rd April 2008 on contracts of consumer credit (hereinafter: the Directive 2008/48/EC) has been in force since 11^th June 2008 and the Member States were obliged to implement it in their legislation within two years, till 12^th May 2010¹⁵. The Directive 2008/48/ EC abolished the Directive 87/102/EEC of 22^nd December 1986 and brought many novelties into consumer credit matter. Apart from the fact that the Directive 2008/48/EC, unlike the previous one, is based on the principle of a maximal harmonization¹⁶, it is necessary to emphasize the introduction of a credit intermediary as an entirely new subject of consumer credit. According to the definition adopted by the Directive 2008/48/EC of the Article 2. (f), a credit intermediary is a natural person or legal entity who does not act as a lender in the market and, within his professional or business activities conducted for a specific counter value¹⁷, represents or offers credit agreements to consumers or helps them over afore-mentioned preparatory actions preceded the conclusion of the contract or concludes credit agreements with consum-ers¹⁸. Besides that, the Directive 2008/48/EC introduces the obligation to inform the consumers in pre-contractual¹⁹ and contractual stages, the obligation to assess a consumer’s creditworthiness²⁰, his/her right to cancel the loan agreement concluded for an indefinite period, and the right to terminate the loan agreement. Consumer information is a basic obligation of a creditor, with the purpose of achieving a greater degree of equalization of the parties²¹. The purpose of the Directive adoption was essentially informing a consumer about the consumer contract, thus eliminating a consumer’s misconceptions regarding the advantages and disadvantages the individual creditor offers in

his contractual provisions22. Information are provided to a consumer in another durable medium23 using the form from Annex II, the Directive entitled “The European Standard Information for Consumer Loans”. For other information, the creditor may provide the consumer in a separate document24.

• II.    1 Fields of application

  The Directive 2008/48/EC refers to the loan agreements defined as agreements whereby a creditor grants or promises to grant a credit to consumers in the form of deferred payment, loan or other similar financial aid²⁵, with the exception of agreements on a permanent service or delivery of goods of the same species the consumer pays in installments during the provision of services or delivery of goods²⁶. In Article 2. (a-l) the Directive 2008/48/ EC explicitly states which contracts are excluded from its application²⁷ and

  further, in Article 3., which contracts are partially excluded from the application. There are primary credit agreements in the form of the possible exceeding the balance on current account (Article 3. (d), and the credit agreement in the form of a tacit overdraft balance on current account (Article 3. (e)). As noted above, the Member States must ensure lenders credit rating consumers when entering the loan agreement²⁸. They should have an access to information or receive them directly from customers or from the database. The information in the database must be available to the other Member States of the European Union²⁹. The information are crucial for a creditor when deciding whether to approve a loan (Article 8 of the Directive 2008/48/EC). The loan agreement must be drawn up on a durable medium; each of the parties must be given a copy of the contract³⁰.

• II.    2 Special Rights of Consumers

  In order to achieve a higher level of consumer protection, the Directive 2008/48/EC regulates some specific consumer rights such as:

• a)    The right to cancel the loan agreement for an indefinite period

The consumer is free at any time and without any obligations to cancel the loan agreement concluded for an indefinite period, unless the parties agreed the notice period which should not be longer than a month31.

• b)    The right to terminate the loan agreement

  The consumer has the right to terminate the loan agreement within fourteen calendar days without giving a reason. The period of fourteen days starts on the date of the loan agreement or the date when the consumer was delivered the contract terms and information according to Article 10. the Directive 2008/48/EC if that day occurred after the day of signing³².

• c)    Related Agreements

The related loan agreement33 is an agreement in which the loan serves solely for financing the delivery contract of certain goods or the provision of certain services, and objectively speaking, the two contracts constitute a single economic entity34.

• d)    Early Repayment³⁵

The consumer has the right at any time to fulfill their obligations from the loan agreement partially or entirely, whereby they become eligible for the reduction of the total cost of the loan which consists of interest and costs of the remaining duration of the contract. Assuming that the pre-payment followed in a period fixed by NCS, the creditor has the right to demand a fair and objectively adequate compensation for possible costs directly linked to an early repayment of the loan36.

• e)    The Transfer of Rights

  When the creditor transfers their rights from the contract or transfers ‘the loan agreement’, the creditor retains all the objections he had to the first provider of credit, including the objection of compensation if the objection is allowed in the law of Member State³⁷. The Directive 2008/48/EC promotes the amicable solving of consumer‘s disputes occurring in consumer’s credit contract, stipulating that the Member States must ensure the existence of consumer’s disputes resolutions³⁸. The ultimate goal of this provision is actually a trend, which is promoted by the Directive 2008/48/EC, to facilitate a

cooperation between all bodies, in order to increase the share of cross-border loans, and to contribute to a cross-border dispute resolutions39.

• III.    Conclusion

  The European Union has been emphasizing consumer protection as one of the most important segments requiring a special attention for many years. In order to create the increased consumer protection and greater transparency of consumer loans at the unique European market, there was adopted the Directive 2008/48/EC. A new legislative framework, adapted to the changes at the financial market, has brought a number of innovations in the field of consumer protection among the Member States. Except that, unlike the previous Directive 87/102/EEC, based on the principle of a maximum harmonization, and regulated the minimum legislative framework for each of the Member States, the Directive 2008/48/EC on consumer credit contract in a matter of consumer lending introduced a number of novelties. The introduction of credit intermediaries as an entirely new entity in consumer lending, the need to inform consumers in the pre-contractual and contractual stages and obligation to conduct assessment of creditworthiness of consumers are some of the important novelties that we emphasized.

Marijana Dukić Mijatović

Vanredni profesor i Prodekan za nauku i međunarodnu saradnju, Pravni fakultet za privredu i pravosuđe Univerziteta Privredna akademija u Novom Sadu

Sanja Gongeta

Viši predavač na Veleučilištu u Vukovaru

Potrošačko kreditiranje u Evropskoj uniji

R ezim e

Modaliteti zaštite potrošača kod potrošačkog kreditiranja u državama članicama Evropske unije su osigurani posebnom direktivom Evropskog parlamenta i Veća (Direktiva 2008/48/EZ o ugovorima o potrošačkom kreditu).

Iako je ovo područje u Evropskoj uniji regulisano direktivama još od 1987. godine (Direktiva 87/102/EEZ), zbog ekonomske krize sve više je dolazilo do izražaja da potrošač, kao slabija ugovorna strana, nije zaštićen u dovoljnoj meri. Direktiva 2008/48/EZ o ugovorima o potrošačkom kreditu zasnovana je na načelu maksimalne harmonizacije, te uređuje minimalni zakonodavni okvir za svaku od država članica.

Ključne reči: potrošačko kreditiranje, zaštita potrošača, Evropska unija, regulatorni okvir.