Report on the operation of Directive 87/102 for the approximation of laws, regulations and administrative provisions of the Member States concerning consumer credit - COM(95) 117 final of 11.05.95 - Summary report of reactions & comments
Date: 1997-09-24
Institutions: European Commission
Subjects: approximation of laws, consumer credit, consumer protection, restriction on competition

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 24.09.1997 
COM(97) 465  final 

Report on the operation of Directive 87/102 for the approximation of 
laws, regulations and administrative provisions of the Member States 
concerning consumer credit - COM(95) 117 final of 11.05.95 

Summary Report of Reactions & Comments 

(presented by the Commission) 

I. INTRODUCTION AND SUMMARY 

1.1 Background 

1.1.1 Report on the Functioning of Directive 87/102/EEC 

1.1.2 Consultations on the Report 

1.1.2.1 European Parliament 

1.1.2.2 Council 

Î. 1.2.3  Other 

1.2 Conclusions of the Summary Report 

II. SUBJECTS RAISED BY THE REPORT COM(95) 117 FINAL 

II. 1  Extension of the scope (Articles 1  & 2) 

II.1.1 Financial limits (>200 and <20 000 ECU) 

II. 1.2 Credit for starting up a business 

II. 1.3 Contracts with a purchase option 

II. 1.4 Building loans/mortgages 

II. 1.5 The list of exceptions in Article 2 

11.2 Advertising targeted at young consumers 

11.3 Obligation on consumers to give information and on professionals to give 

advice 

11.4 Rules on overdrafts (Articles 2. le and 6) 

II. 5  Inquiry  into  consumers'  circumstances  before  ordering  repossession 

(Article 7) 

11.6 Early repayment (Article 8) 

11.7 Bills of exchange (Article 10) 

11.8 Subsidiary liability (Article 11) 

11.9 Creation  of bodies  authorised  to  receive  consumer  complaints  (Article 

12) 

11.10 Cooling-off periods 

II. 11 Consequences of non-execution of consumer credit contracts 

11.12 Usury 

2 

4 

4 

4 

4 

4 

5 

5 

5 

7 

7 

7 

7 

8 

8 

9 

10 

10 

11 

11 

12 

12 

13 

13 

14 

14 

15 

11.13 Credit intermediaries 

11.14 Data Protection 

11.15 Guarantors 

11.16 Over-indebtedness 

III. GENERAL ISSUES.. 

IV. ASSOCIATED ACTION 

V.  THE  COMMISSION  GREEN  PAPER  AND  COMMUNICATION  ON 

FINANCIAL SERVICES 

VI. ANNEXES 

16 

16 

17 

17 

18 

19 

19 

21 

I.  INTRODUCTION AND SUMMARY 

1.1  Background 

/. 1.1  Report on the Functioning of Directive 87/102/EEC 

1. 
Article  17  of  Council  Directive  87/102/EEC  on  the  approximation  of  the  laws, 
regulations  and  administrative  provisions  of  the  Member  States  concerning  consumer 
credit required the Commission to present a Report to the Council on the operation of this 
Directive within five years of its entry into  effect. 

2. 
In  conformity  with  the  remit  of  Article  17,  a  questionnaire  addressing  different 
aspects of the consumer  credit  market was distributed  in June  1994 (letter D02058 of 24 
June  1994)  to  Member  States  and  to  European  associations  of  creditors,  traders  and 
consumers.  Opinions  were  also  invited  from  the  academic  community.  Based  on  the 
responses received  and  on a number of studies which the Commission had  commissioned 
concerning the transposition  of the Directive and the functioning  of the market,  a Report 
was prepared and was adopted by the Commission on 11 May  1995, document COM (95) 
117  final. 

3. 
This Report was intended  as a discussion document and the  subjects  raised  in the 
Report  were  therefore  not  "proposals"  but  rather  a  discussion  of  the  theme  "consumer 
credit" and, in some instances where the Commission already had reflected  on the issues, a 
statement  of  the  Commission's  tentative  opinion.  In  other  words,  the  Report  did  not 
constitute a legislative program, but  one element  among several for  the preparation  of an 
overhaul of directive 87/102/EEC with later amendments. 

/. /. 2  Consultations on the Report 

The Report  was formally  transmitted  to the European  Parliament  and the Council 

4. 
on  11 May 1995. 

1.1.2.1  European Parliament 

The  Legal  Affairs  Committee  was  appointed  lead  committee;  the  Environment,  Public 
Health & Consumer Protection Committee was associated. 

1.1.2.1.1  Environment, Public Health & Consumer Protection Committee 

Ms.  Annemarie  Kuhn  (PSE/D) was rapporteur, her  draft  Opinion,  adopted  on  25  April 
1996,  is to  a large extent favourable  to the arguments put forth  in the Report  regarding the 
amendment of Directive 87/102 (extension of the scope, advertising and information,  types of 
credit agreement, the cooling-off period, etc.) and to its points of view on  mortgage credit. 

1.1.2.1.2  Legal Affairs Committee 

Mr Ernesto Caccavale (UPE/IT) was appointed Rapporteur; his preliminary draft  report, a 
Working  Document,  was discussed  at  a Public  Hearing  organised  by the Legal  Affairs 
Committee on 22 April  1996 and by the Legal Affairs  Committee as such on 22-23 July, 
28  October  and 26 November  1996. The draft  Report  was approved  on  17 December 
1996,  but  only  voted  by the EP's Plenary  session  of  11  March  1997. The  resolution 
adopted is enclosed in Annex 2. 

1.1.2.2  Council 

The  Report  was  discussed  by  the  Working  Party  on  Protection  and  Information  of 
Consumers at meetings during September and October  1995. The Council of 9 November 
1995 adopted  a Resolution  welcoming the Report,  and invited  the Commission to  "take 
into account the comments received on its Report...,  a summary of which should be made 
available". 

This Summary  Report  constitutes  the Commission's  fulfilling  of the  request  by the 
Council. 

1.1.2.3  Other 

In addition to the formal  consultation  procedure  outlined  above,  the Summary Report is 
based on the following consultation measures: 

a) The Report COM(95) 117 final was sent in June 1995 to EEA Member States through their 
Permanent Representations, and directly to certain national authorities in charge of consumer 
affairs  (Ombudsmen).  National  authorities  were  invited  to  comment  on the Report  and a 
'reminder1 letter to this effect  was sent in January  1996, requesting responses by mid-March 
1996. A further 'reminder1 letter was sent in June 1996, requesting responses by mid-July 1996. 
Responses  have  been  received from Belgium,  Denmark,  Germany,  Spain,  France,  Ireland, 
Luxembourg,  the  Netherlands,  Austria,  Portugal,  Finland,  Sweden,  the  United  Kingdom, 
Iceland, and Norway. Of these, Luxembourg and Norway had no comments at all to make on 
the  Report.1  Italy,  evoking  "structural  difficulties  and lack of  co-ordination"  was in no 
position to give an assessment of the application of Directive. Greece replied to the original 
questionnaire distributed in 1994, on which the Report COM(95) 117 final was based. 

b)  Moreover,  the Report  was distributed to financial, retail and consumer  organisations, in 
short all those involved in the original consultation process (the questionnaire) as well as any 
other potentially interested parties. A list of the responses received is attached in Annex 1. 

1.2  Conclusions of the Summary Report 

The Summary Report  outlines comments received  on a list of issues raised by the 

5. 
Report COM(95) 117 final, namely: 

•  extension of the scope of Directive 87/102/EEC, 

•  advertising targeted at young consumers, 

l 

Iceland being the only EEA Member  State that made a contribution,  its comments on each issue are 
mentioned separately right after EU Member States' comments. 

obligation on consumers to give information and on professionals to give advice, 

rules on overdrafts, 

inquiry into consumers circumstances before ordering repossession, 

early repayment, 

bills of exchange, 

subsidiary liability, 

creation of bodies authorised to receive consumer complaints, 

cooling-off periods, 

consequences  of non-execution of consumer credit contracts, 

usury, 

credit intermediaries, 

data protection, 

guarantors, 

over-indebtedness, and 

other general issues. 

From  the  remarks  received  on  these  subjects  the  following  conclusions  can  be 

6. 
reached: 

-  Member States are more or less  divided over the suggestions  of the Report  COM  (95) 
117 with the UK, the Netherlands and Germany appearing more sceptical and Portugal, 
Ireland,  Spain and Sweden appearing more supportive; 

-  Iceland is generally supportive of the Commission's  suggestions; 

-  financial  services  industry  generally  prefer  to  keep  the  status  quo  and  point  out 
difficulties  related to  the introduction  of new rules, but are more  supportive  as regards 
codes of conduct; 

-  consumer and money advice groups on the other hand generally welcome the proposals 

and stress the need for legislative measures rather than codes of conduct. 

IL  SUBJECTS RAISED BY THE  REPORT COM(95) 117 FINAL 

II. 1  Extension of the scope (Articles 1 & 2). 

//. /. 1  Financial limits (>200 and <20 000 ECU) 

The scope of the Directive is consumer credit amounts above 200 ECU, but below 
7. 
20 000 ECU.  The Directive  states  that  the  Council  shall periodically  review  such limits. 
As  certain  Member  States  have  not  used  the  limits  in  the  Directive,  the  Report  in 
paragraphs  24  and  155, proposed  the upward  revision  or  abolition  of  the  20  000  ECU 
ceiling in the Directive. 

8. 
Member  State responses were divided  on the  subject  of the upper limit, with UK 
and Netherlands accepting an increase but not removal, France wishing the upper limit to 
be retained while Austria stated that experience has shown that no difficulties  arise even if 
the upper limit is removed,  and  others - considering that  consumers  also need  protection 
for  large credit  amounts - are either in favour  of the removal  of the upper limit  (Finland, 
Spain,  Portugal,  Sweden),  or  have  not  set  any  financial  limits  in  their  legislation 
(Germany, Ireland). Iceland favours the removal of the upper limit. 

9. 
Responses from the financial  services industry  opposed  the removal  of the  upper 
limit  but  were  prepared  to  accept  increases  in line with  indexation.  Others  opposed  any 
extension of the scope upwards, for various reasons including the "difficulty  in calculating 
APRs for larger amounts" and their view that a borrower who borrows more than 20 000 
ECU is generally in a better  bargaining position  and  should  continue to  benefit  from  free 
play  of  competition.  The  Finance  & Leasing  Association,  FLA,  went  further  in  stating 
that "if there is a review, this should be to a fixed limit, determined nationally by individual 
Member  States, not in ECU".  The European Banking Federation,  EBF,  stated  that  those 
Member  States  which  did  not  use  the  ceiling  should  be  encouraged  to  align  themselves 
with the level established in the Directive. 

10. 
Consumer  and  money  advice groups,  on the  contrary,  supported  the  abolition  of 
the limits as "it would mean more transactions (including mortgages) would be regulated". 

11. 
The financial services industry  also opposed  the removal  of the  lower  limit  as  "it 
would  place  considerable  cost  burdens  on  finance  providers  for  purchases  below  200 
ECU". 

//. 1.2  Credit for  starting up a business 

In  paragraphs  21  and  108,  the  possibility  of  including  credit  taken  out  by 

12. 
consumers with a view to starting up a business was raised. 

As  can  be  seen  in  enclosure  2,  this  concept  also  was  of  great  interest  to  the 

13. 
European Parliament. 

14. 
A number  of Member  States  opposed  this  suggestion  (The Netherlands,  the  UK, 
Denmark,  Spain,  France).  Others  have  either  extended  the  scope  of  their  legislation  to 
cover consumer credit whose purpose is to launch a business (Germany) or could  support 
this idea (Portugal, Finland, Sweden2). Iceland is supportive of this suggestion, too. 

2 

Sweden can support broadening of the scope only to include legal entities of consumers. 

7 

15. 
The  financial  services  industry  and  the  American  Chamber  of  Commerce  also 
opposed  this on the grounds that  such borrowers have more professional  advice and less 
need  of  protection;  they  need  more flexibility than  regulation  would  allow  and  might 
actually  see  their  opportunities  for  credit  reduced  if  they  were  to  be  covered  by  the 
Directive. 

16. 
Others  also  stated  that  any  change  in  the  definition  of  the  consumer  in  this 
Directive  would  conflict  with  the  definitions  of  consumers  in  the  other  consumer 
Directives. 

17. 
Although  the Danish  Consumer  Council  (Forbrugerrâdet)  sees no  reason  for  the 
scope  to  be  extended  as  suggested  above,  it  could  support  the  idea  of  widening  it  to 
include legal persons that make up a class of consumers (e.g. co-operatives). 

//. /. 3  Contracts with a purchase option 

In paragraphs  18 and  125, the Report proposed the extension of the scope of the 

18. 
Directive to contracts with a purchase option. 

19. 
The  Netherlands  felt  that  this  area  could  be  examined,  perhaps  to  restrict  the 
exemption  in  the  Directive  to  straightforward  hiring  agreements  where  no  ownership 
passes.  Other Member  States have included hiring  agreements with  a purchase  option in 
their  legislation  (Spain,  France,  Ireland,  Sweden).  Iceland  is  rather  sceptical  about  this 
suggestion. 

20. 
Eurofinas  and Eurolease strongly opposed the proposal as they feel that leasing is 
very  different  from  credit  (and  that  no  APR  can  be  calculated  for  leasing).  The  FLA 
pointed  out  that  this is  one  of the  reasons  for  the  proposal  in  the  UK  to  remove  small 
businesses from the scope of the Consumer Credit Act. 

21. 
The  Consumers  in  Europe  Group  felt  that  the  Directive  should  be  extended  to 
consumer hire as there is no inherent difference  between a loan for  a purchase and a loan 
for  hire,  while  other  money  advice  organisations  agreed  that  the  exemption  should  be 
removed. 

//. L 4  Building loans / mortgages 

22. 
In  paragraph  121  of the  Report,  there was  a  discussion  of the  extension  of  the 
scope of the Directive to loans for building work not  secured  against  a mortgage and the 
advisability of a Directive relating to mortgage was also considered. 

23.  While  the  Netherlands  agreed  that  consumers  need  protection  in  this  area,  it 
preferred  a  code  to  legislation  (as  in  the  Netherlands).  Some  Member  Sates  (UK, 
Denmark)  also  did  not  feel  that  mortgage  credit  should  be  regulated  at  European  level 
whereas  others (Finland, Spain, France, Ireland, Austria), felt that it is 
particularly 
important  to  cover  consumers in relation to housing loans; they have, therefore,  included 
in their legislation loans for  building work not  secured  against  mortgage  and  support  the 
suggestion  of  legislative  intervention  in  the  field  of  mortgage  credit.  3  Portugal  and 

3 

Spain: separate Directive; France: modification  of 87/102/EEC. 

8 

Sweden  also  welcome  the  suggestions  of  the  Report.  Iceland  while  supportive  of  the 
suggestions  thinks,  nevertheless,  that  more information  is needed  before  deciding  on  the 
feasibility  of a directive on  mortgage credit. 

24. 
Similarly,  money  advice  and  consumer  groups  felt  that  such  loans  should  be 
included  in the  scope  of the  Directive  and  that  only  loans  or  credit  agreements  used  to 
secure  an interest  in property  should  be  secured  against  the  property  as it  is  inequitable 
that  a default  on an unsecured  credit  card  agreement  should result in the loss of a family 
home, as is possible in the UK.  The Consumers in Europe  Group  pointed  out  that while 
some  companies  are  deterred  from  offering  cross-border  mortgages  by  differences  in 
legislation e.g.  on property  purchase, others do  offer  such mortgages  and they  therefore 
feel  that  consumers  should  be  entitled  to  at  least  basic  protection  in  this  area  (e.g. 
information  on terms, availability of redress, a comparator  4...). 

The financial  services industry were opposed to the regulation  of mortgages in the 
25. 
Directive due to the differences  in national legislation and the impossibility of establishing 
equal  treatment  in  such  conditions.  They  also  pointed  out  that  the  Commission  cannot 
regulate  civil  law  e.g.  property  registration,  repossession  rules...  Others  stated  that 
consumers doing renovation work will already have taken professional  advice and  do not 
therefore  need  protection,  while  protection  will  already  have  been  provided  in  national 
legislation for certain aspects (notary, surveyor...). Loans for building work were felt to be 
an investment, not a consumer loan, irrespective of the security for the loan. 

II. 1.5  The list of exceptions in Article 2 

In paragraphs  18 and  119-163, it was proposed to shorten the list of exceptions in 
26. 
Article 2 of the Directive.  Generally, the UK and UK financial services industry  opposed 
this idea as these are not considered as derogation but as rational and justifiable  limitations 
to the  scope of the Directive  and  as such have been  included  in the Exempt  Agreements 
Order.  5 Sweden on the other hand could support the Commission's proposal to examine -
with  the  eventual  aim  of  deletion  -  whether  the  derogation  relating  to  agreements 
concerning  credit  repayable in four  instalments is of interest  to  the Member  States which 
have included it in their national legislation. 

The  Danish  Consumer  Council  considers  that  most  of the  exemptions  of  Article 

27. 
2(1) should be abolished as arbitrary. 

28. 
Concerning  "free  credit",  the  Money  Advice and Budgeting  Service  (MABS)  of 
Ireland  6,  claiming  that  there  is  no  such  thing,  would  support  an  initiative  to  provide 
consumers with full  details of  free  credit offers  in order to allow them to make clear and 
valued decisions. 

A yardstick enabling consumers to make comparisons. 

5 

The 1989 Consumer Credit (Exempt Agreements) Order made under section 16(5) of the Consumer 
Credit Act exempts certain credit agreements from the effects of the Act. 

6  Established  by  the  Department  of  Social  Welfare  to  combat  the problems  faced  by  people  who  borrow  from 

moneylenders. 

11.2  Advertising targeted at young consumers 

In  paragraphs  22  and  171,  the  Report  raised  the  issue  of  whether  a  Code  of 
29. 
conduct for  credit advertising targeted  at young people is necessary. Legislation in certain 
Member States already regulates this issue. 

30.  Member  States' responses varied from  support  (from  Belgium, which  already  has 
such  a  code;  Spain;  France,  which  supports  legislative  measures  of  general  character  in 
this field; Austria, which supports the introduction of general provisions for the protection 
of young people going beyond advertising; Finland; Sweden, which feels that  such a code 
should not be restricted to marketing activities aimed at the young) to opposition (the UK 
wanted  evidence of the existence of problems and in any case preferred  self-regulation  by 
businesses  in whose  interest  it  is to  act  responsibly).  The Netherlands,  although  it  has a 
more protective legislation,  does not think that advertising addressed to minors should be 
specifically  regulated.  Iceland,  whose  legislation  contains  a  general  provision  to  this 
purpose, supports the suggestions of the Report. 

Financial  and  marketing  organisations  did  not  generally  object  to  codes  although 
31. 
some were not  convinced  of the need since banks would, in their own interest,  limit risky 
behaviour by young consumers. Citicorp, in particular, believes that, with the exception of 
uniform  disclosure requirements and misleading advertising provisions, any restrictions on 
credit  advertising  reduce  transparency  and  constitute  regulatory  barriers  that  retard 
competition. 

Consumer and money advice groups - with the exception of the Danish Consumer 
32. 
Council  and MABS that  support  a code of good practice - felt  that any regulation of the 
area should be by legislation ratner than codes as, in not being respected,  these legitimise 
abuses, and that any Code should be closely monitored for compliance. The Consumers in 
Europe Group felt that all consumers could benefit from such a code. 

11.3  Obligation  on  consumers  to  give  information  and  on  professionals  to  give 
advice 

33. 
In paragraphs  23 and  180, the Report  raised  the issue  of the  establishment  of an 
obligation  on  the  consumer  to  provide  information  (i.e.  all  particulars  necessary  for  a 
credit transaction)  and on the professional  to provide advice (i.e. taking into  account  the 
consumer's financial circumstances). 

34. 
There  appears  to  have  been  some  ambiguity  on  this  point,  with  many  industry 
groups  fearing  that  'advice' required  them to give detailed  advice, leading to  information 
overload (or the need to give information  on competitors' products  7), conflict  of interests 
and the possibility of negligence suits. The intention of the chapter was not to go  so  far; 
the  word  'advice'  was  used  in  a  general  sense,  meaning  a reasonable  level  of  advice  to 
enable  the  consumer  to  make  an  informed  decision,  whether  in  a  shop  or  a  financial 
institution.  The Report  also made  clear  that  any  such information  requirements  must  be 
reciprocal. 

35.  Member  States pointed out various problems in that advice must be customised to 
each  borrower's  personal  circumstances  so  that  only  general  rules  could  be  considered, 

7  Although it should be noted that a recent Danish law apparently requires lenders to do just that! 

10 

although  some Member  States  e.g.  Belgium had  already  introduced  such  a  requirement. 
Therefore  certain  Member  States  either  are  hesitant  about  or  do  not  favour  the 
establishment  of  such  a  reciprocal  information  obligation  (Denmark,  Germany,  Austria, 
the UK). Others are either in favour (Spain, Portugal, Finland) or could go along with such a 
suggestion provided that the Commission's proposals become more specific (France, Sweden). 

Financial services industry generally opposed the proposal (though perhaps due to 
36. 
a misunderstanding),  stating that it would remove decision-making responsibility from the 
borrower,  or  that  no  such  obligation  was  necessary  as  it  would  in  any  case  be  in  the 
interests of the lender. 

37. 
Consumer  and  money  advice  organisations  welcomed  the  proposal  but  stressed 
that  advice and  information  should  be proportionate  and  emphasised  the  importance  (as 
did several banks) of independent advice for consumers. 

11.4  Rules on overdrafts (Articles 2.le and 6) 

Paragraphs 25 and  150 of the Report proposed the amendment  of Article 6 of the 
38. 
Directive in order to cover credit lines linked to a card.  At present,  such credit  (usually a 
credit line attached to a current  account which can be accessed  by a card) is unregulated 
either  because  it  is  repaid  within  3  months  or  because  national  legislation  does  not 
consider such cards to be credit cards unless the credit to which it provides access is part 
of the same agreement. 

39.  Member  States'  responses  varied  from  the  situation  in  Belgium  and  Sweden, 
where this proposal has already been implemented, to the UK preference  for  new general 
rules to take into account developments in the market and to Germany which does not see 
the necessity for additional rules. A large number of Member  States favour  the  adaptation 
of the Directive to  the multitude  of operations  of credit  cards  (Denmark,  Spain,  France, 
Ireland,  the Netherlands  8, Austria,  Portugal,  Finland).  Iceland  on the  other  hand  thinks 
that the issue should be further  studied. 

The  financial  services  industry  generally  preferred  to  keep  the  status  quo  and 
40. 
pointing  out  difficulties  in  providing  details  of  repayment  schedules,  whereas  the 
consumer  and  money  advice  sector  supported  specification  of  the  rules  in  relation  to 
credit cards (e.g. costs, minimum amounts to be reimbursed, repayment schedules...). 

41. 
Certain consumer groups on the other hand  either support the abolition  of Article 
2.  1(e) so that credit in the form of advances on a current account is included in the scope 
(the Danish  Consumer  Council),  or  could  go  along  with  the  proposal  of  the  Report  to 
further  specify the rules governing credit cards (Consumer DebtNet, MABS). 

11.5  Inquiry into consumers' circumstances before ordering repossession (Article 7) 

In  paragraph  188  of  the  Report,  discussing  repossession,  it  was  considered 
42. 
advisable that courts be given the power to review the circumstances (financial  and  other) 
of  consumers  before  ordering  repossession  of  goods  in  order  to  avoid  cases  of  unjust 
enrichment. 

8  NL feel that only credit facilities whose duration exceeds three months should come into play. 

11 

43.  While the  Netherlands  and  several  industry  groups  felt  that  this was  a matter  of 
subsidiarity, other industry organisations feared the US situation of 'individual bankruptcy' 
where  lenders  are  unable  to  recover  financed  goods.  The  UK  believes  that  national 
legislation handles quite adequately this issue, while Sweden, although sceptical of such an 
idea,  nevertheless  proposes  the introduction  of rules for  determining  the  value  of  goods 
when they  are repossessed  and the  cancellation  of debts. In Iceland  the  situation  is well 
regulated,  but  national  authorities  can  go  along  with  the  idea  of  further  guidance  for 
courts. 

Certain  consumer  and  money  advice  organisations  (The  Consumer  DebtNet 
44. 
network,  the  Danish  Consumer  Council,  MABS),  on  the  other  hand,  agreed  with  the 
proposal of the Report. 

11.6  Early repayment (Article 8) 

45. 
Paragraph  193 of the Report  stresses the fact  that early repayment  provisions that 
give consumers the right to rescind ongoing credit agreements ahead of schedule, become 
more important in the context of monetary union. 

46.  Member  States,  with  the  exception  of  the  Netherlands  which  felt  that  their 
legislation is adequate, did not make any comments on this issue. Iceland, too, thinks that 
its legislation adequately covers the matter. 

47. 
Citicorp  echoed  the  concerns  of  the  financial  circles  emphasising  that  the 
possibility  that  contracts  could  be  rescinded  when  the Euro  is introduced  would  have a 
chilling effect  on industry.9 

Lastly,  Money  Advice  and  Budgeting  Service  recommend  extension  of  early 

48. 
repayment rebates to mortgages. 

11.7  Bills of exchange (Article 10) 

In  paragraphs  26  and  205  of the  Report,  it  was  proposed  that  bills  of  exchange 

49. 
should be prohibited. 

50.  Most  Member  States  have  already  done  so,  but  nevertheless  there  was  some 
reaction to this proposal. Positive reactions were of course received from Member  States 
whose  legislation  cover  this  issue to  a varying  extent:  Belgium,  Spain,  France,  Finland, 
Sweden;  others were less enthusiastic  (the Netherlands: no need for  more  harmonisation 
in this area), or negative (Austria, UK: no major  problems with consumers so far,  bills of 
exchange are a useful  commercial instruments); the latter comment does, however,  reveal 
a  confusion:  it  is  only the  prohibition  of bills  of  exchange  for  consumer credit which is 
considered  and  not  the  commercial  instrument  (with  implications  for  international  trade 
and existing agreements e.g. UNCITRAL...). Iceland took a negative stance, too. 

It  is  recalled  in  connection  with  Citicorp's  remark that  there  is an  important  difference  between  the  right  to 
early  repayment  and  the  principle  of  continuity  of  contracts.  The  former  is  applicable  irrespective  of  the 
established  currency, i.e.  since the advent of the Euro, on  1.1.1999, a consumer  discharging his/her  obligations 
before  the time fixed by the  agreement  shall have the right to an equitable reduction in the total  cost  of credit 
expressed in Euro. The latter means that the introduction of the Euro should not constitute a justification  for the 
application of clauses permitting the creditor to unilaterally cancel a contract or modify  its terms. 

12 

11.8  Subsidiary liability (Article 11) 

51.  Most Member States transposed Article  11 as drafted  although some went  further. 
Ambiguity has resulted from the term 'exclusively' - it could rule out the use of the Article 
if the  supplier,  for  example,  occasionally uses  another  creditor.  In  paragraph  213  of the 
Report it was therefore proposed, for the sake of clarity, to remove the word  'exclusively' 
from the text of Article  11. 

52. 
Only four Member States responded on this point: the Netherlands stated that it is 
a  matter  of  subsidiarity  and  civil  law,  whereas  the  UK,  having  recently  decided  after  a 
review of their national legislation  10, to maintain it as it is, felt  that  it did not  experience 
the  problem.  Sweden  and  France  on  the  other  hand  agree  with  the  suggestions  of  the 
Report  with  the  latter  suggesting  a  modification  of  Article  11  so  that  it  becomes  less 
restrictive and clearer in meaning. 

53. 
The FLA felt that this proposal, in conjunction  with the proposals  on the removal 
of  the  ceiling  and  the  inclusion  of  business  start-up  finance,  would  create  substantial 
contingent liabilities for credit grantors. 

The  Danish  Consumer  Council  on  the  other  hand  agrees  with  the  proposed 

54. 
amendment. 

11.9  Creation of bodies authorised to receive consumer complaints (Article 12) 

55.  While  Article  12  of  the  Directive  allowed  Member  States  three  options  for 
supervising the implementation of the Directive, the Report suggests, at paragraph 27 and 
219, that the third of these options, the creation of bodies authorised to receive consumer 
complaints relating to consumer credit, should be made mandatory. 

Certain  Member  States  (Spain,  France,  the  Netherlands,  UK)  felt  that  their 
56. 
existing  mechanisms  were  adequate  for  the  purpose  of  meeting  consumer  complaints; 
France,  nevertheless,  considers  the  treatment  of  cross-border  disputes  to  be  a  priority. 
Sweden,  on the other hand,  expressed  its support.  As regards  sanctions,  Denmark  could 
go along with the introduction of a framework-Article leaving Member States with a room 
for  manoeuvre.  Iceland  was  supportive  regarding  the  creation  of bodies  and  thinks  that 
co-ordination is reasonable as regards sanctions. 

57. 
The financial services  industry  felt  that  existing  codes  /  voluntary  arrangements 
were  adequate  and  that  subsidiarity  dictates  that  individual  States  are  best  equipped  to 
decide for themselves the complaint-settlement mechanism that best suits them. 

58. 
Consumer and money advice organisations, on the other hand,  supported the view 
expressed and felt that Member States should, in implementing EU legislation, be required 
to  state which bodies would  be responsible  for  its  enforcement,  and  that  sanctions  were 
necessary for non-compliance. 

59. 
The Commission  is currently  examining the exact  application  of Article  12 in the 
legislation of Member States as part of its remit to monitor the transposition of directives. 

10  Section 75 of the Consumer Credit Act. 

13 

II. 10  Cooling-off periods 

60. 
As  several  Member  States  have  introduced  forms  of  cooling-off  periods  during 
which  consumers may rescind  certain types of credit  agreements, paragraphs  29 and 266 
of the Report proposed that the introduction  - where possible - of a harmonised  cooling-
off period, and enforcement  of such a provision, should be studied. 

6 Î. 
Certain Member  States expressed misgivings that too general a cooling-off  period 
for  all transactions  would  make them  more  difficult  and would  add  to  the  cost  of credit 
and/or  cause  legal  uncertainty  (Germany,  the  Netherlands,  Austria,  UK).  Others  either 
could  agree with the idea of a harmonised  cooling-off  period  (Spain, France,  Sweden) or 
thought  that  the  matter  needs  further  study  (Denmark).  This  latter  view  is  shared  by 
Iceland, too. 

Financial  services  industry  stated  that  it  would  lead  to  unnecessary  delays, 
62. 
rebounding  on  the  consumer;  that  cooling-off  periods  were  specific  to  the  social  and 
economic  circumstances  in  each Member  State; that  it  could  not  in  any  event  apply  to 
mortgage  credit;  and  that  it  would  provide  unscrupulous  borrowers  with  speculation 
opportunities. 

Consumer  organisations  welcomed  the  move,  for  e.g.  credit  exceeding  a 

63. 
prescribed amount. 

11.11  Consequences of non-execution of consumer credit contracts 

In paragraphs  30 and  267-270  of the Report,  the consequences  for  consumers of 
64. 
the non-execution  of credit  agreements (default,  penalties,  recovery  procedures...  ) were 
discussed  and  the  need  for  better  balance  between  parties  was  proposed.  The  Report 
stated that the Commission was examining the possibility of laying down ground-rules,  for 
example in the shape of a code of conduct on debt recovery. 

65. 
In  order  to  have  an  in-depth  knowledge  of  the  problems  related  to  the  non-
execution of consumer credit contracts, the Commission launched a study whose  objective 
was  to  analyse  the  nature  and  adequacy  of  control  instruments  implemented  by  the  15 
Member  States in this area.  The conclusions  of the final report  of the  study,  delivered in 
December  1996, are the following: 

a)  in a general manner uncertainties and lacunae of Member States laws have been 

filled  by jurisprudence to a limited extent; 

b) jurisprudence  itself  is  not  satisfactory  when  it  comes  to  the  protection  of 

consumers' interests; 

c)  there is a need for remedial action (specified  in the study) at European level. 

66.  Member  State  responses  varied  from  the  Dutch  reaction  (subsidiarity)  to  the 
Finnish description of their existing rules in this area. Austria felt that a harmonised rule is 
necessary to protect  creditors in the event of enforcement  in other Member  States, while 
the  UK  felt  that  national  legislation  is  sufficient  to  deal  with  the  problem  effectively. 

14 

Moreover, other Member States either can support initiatives (Spain,  Sweden  n)  or  have 
no problems with them provided that they become more precise  (France).  Iceland  on the 
other  hand  did  not  make  any  comments  on the grounds that  Commission's  intentions  in 
this area were not clear. 

67. 
Financial services industry were divided on the subject  of a Code of Conduct, with 
some  groups  supporting  the  idea  (provided  it  had  statutory  backing)  and  others  stating 
that it was not necessary as all Member States had different  rules on the subject. 

68.  Money advice and  consumer  organisations felt that  a Code of conduct  is urgently 
needed  and  called  for  transparent  recovery  procedures.  The  Consumer  DebtNet  and 
MABS,  although  agreeing  with  a  code  of  conduct  as  regards  recovery  practices,  are 
sceptical  about  assignment  of  wages  and  squarely  oppose  any  penalties  or  interest  on 
arrears in the event of default. 

11.12  Usury 

69. 
Usury has been debated  in many Member  States in recent years. In paragraphs 31 
and 297 of the Report,  it was suggested that debate should also take place at  Community 
level, particularly in the context of monetary union,  since any rules, if they were felt  to be 
necessary, would then be at Community level. 

70.  Member  States'  responses  were  divided,  ranging  from  the  Dutch  view  that  any 
problems can be solved by fixing  maximum rates at national level, to the UK  conclusion, 
having abandoned  national rates, that they do not work.  Some Member  States  share to  a 
large  extent  the  views  expressed  in  the  Report  (Spain,  Ireland  n,  Portugal,  Finland), 
whereas  others,  although  supportive,  believe  that  the  introduction  of  Community-wide 
maximum  interest  rates  is  difficult  (Sweden)  or  not  realistic  (Germany).  Denmark  and 
France, on the other hand, think that the introduction of Community rules on usury should 
be avoided. Iceland is generally supportive of the Report's suggestions. 

71. 
BEUC  agreed that the subject  should be discussed  and legislated  for  at  European 
level,  defining  a  maximum  rate.  This  idea  was  also  shared  by  MABS  which  further 
suggested  that  the  ideal  source  of  credit  for  low-income  families  would  be  small  loans 
offered  by  Community  Banks  and  Credit  Unions.  Others,  both  consumer  and  industry 
groups, also welcomed a debate at Community level. 

72. 
Financial  services industry, in general, however,  advised  against  the imposition  of 
maximum  rates,  at  national  or  Community  level,  for  reasons  varying  from  the  lack  of 
competence  of  the  Commission  to  do  so  to  a  desire  to  see  a  flexible  approach  which 
would  not  cause distortions  in the market,  and the need  to  let  banks  charge  rates which 
reflect  the  risks.  The FLA  stated  that  European  debate  would  be  "a waste  of  time  and 
resource (sic)". 

11  Sweden also suggested rules concerning the lender's right to premature payment  along the lines of the  Swedish 

Credit Act. 

12  Ministry of  Social Welfare. 

15 

11.13  Credit intermediaries 

73. 
In paragraphs  32 and 302 of the Report,  it was announced that  a study would  be 
commissioned  on the subject  of credit intermediaries in order to determine whether or not 
the rules designed to protect consumers are being effectively  enforced. 

74. 
The Member  States that  made comments (France,  Sweden,  UK,  Spain)  generally 
supported  the  idea  of  a  study.  Spain  even  favours  the  creation  of  a  register  of  credit 
intermediaries. Iceland is supportive of a study, too. 

Some  respondents  expressed  interest  in  this  study  and  stressed  the  need  to 
75. 
reinforce  and adapt existing systems to catch all types of "lenders". The Danish Consumer 
Council  believes  that  there  is  a  need  to  impose  on  credit  intermediaries  the  same 
information  requirements  as  are  imposed  on  credit  providers.  The  British  Bankers' 
Association  also  suggested  that  if problems  exist  in this field in other Member  States,  it 
might well make  sense to  extend  to them  provisions  concerning  advertising  or  licensing, 
as in the United Kingdom. 

The main conclusion of the final report of the study, delivered in July  1996, is that 
76. 
credit  intermediaries  play  an undoubtedly  useful  role,  but  are  often  criticised  for  certain 
malpractice  (lack  of  correct  information  to  consumers,  misleading  advertising,  usurious 
interest  rates,  encouragement  to  over-indebtedness,  etc.). As  a result,  there  is  a need  at 
Community  level for  remedial  action;  the  study  makes  certain  recommendations  to  that 
effect. 

11.14  Data Protection 

77. 
The  Report  discussed  credit-scoring  and  credit-referencing  in  paragraphs  303  -
338.  Many Member  State responses  simply described  their national  systems /  legislation, 
while  others  specifically  agreed  with  the  statement  in  the  Report  that  it  will  be  up  to 
Member  States  to  apply the  provisions  of the framework  Directive  on  the  protection  of 
personal  data in these areas. The Commission therefore  took  no particular  stance  on this 
subject,  other than to describe certain concerns. 

78. 
Consumer and money advice groups shared the concerns about parameters for  the 
use  of  such  data,  with  the  Money  Advice  Association  describing  them  as  "economic 
criminal  records"  and  stating  that  remedies  for  abuse  /  misuse  are  "minimal  and 
ineffective". 

79. 
Other  responses  were  varied,  ranging  from  advocating  voluntary  approaches  to 
welcoming more use of credit-scoring. CGER, the Belgian Caisse Générale d'Epargne  et 
de Retraite  expressed  a preference  for  negative centrales 13 but  opposed  the  "raising of 
centrales to a European level" while Eurofinas called for a "Europe-wide system of credit-
referencing,  suitably regulated and controlled". 

11.15  Guarantors 

80. 
The  Report  discussed  guarantors  in  paragraphs  339-345.  A  guarantor  is  a  third 
party to  a credit  agreement, who provides security for the loan,  accepting liability in the 

13  Credit information centers that keep records on consumers' solvency. 

16 

event  of default  by the borrower.  As they quite often  have less legal  protection  than  the 
borrower  (frequently  a  friend  or  relative),  and  are  not  covered  by  Directive  87/102, 
several Member  States have introduced  different  forms  of protection  for  guarantors.  The 
Report  proposes  extending  to  guarantors  certain  information  obligations  provided  for  in 
the Directive. 

In  their  responses  to  the  Report,  certain  Member  States  (Austria,  Finland) 
81. 
described  their  national  legislation  on  aspects  such  as the  creditors'  obligation  to  inform 
the guarantor, or rules governing the degree of affinity.  Other Member States (Denmark14, 
Spain, France15, Sweden) along with consumer and money advice organisations  supported 
the Commission's idea of extending certain protections in the Directive to guarantors. The 
UK thinks that national legislation, coupled with codes of conduct, is enough to tackle any 
problems. Iceland is supportive of the Report's proposals, too. 

82. 
Financial  services industry  opposed  any moves in this area,  pointing  out  variously 
that  guarantees,  not  being  credit,  cannot  fall  within  the  scope  of  a  measure  regulating 
consumer  credit;  that  rules  of banking  secrecy  which  prevent  disclosure  to  third  parties 
(i.e.  the guarantor)  of the  details of the loan  contract;  and  subsidiarity  while  stating  that 
their national legislation / Codes of conduct dealt effectively  with the situation. 

11.16  Over-indebtedness 

83. 
In paragraphs  35  and  364  - 383  of the Report,  the  subject  of  over-indebtedness, 
of  increasing  concern  to  Member  States  in  recent  years,  was  described.  The  Report 
proposed  that  the  Commission  would  study  the  application  of  the  rules  on  over-
indebtedness  in  Member  States,  non-regulatory  mechanisms  which  might  be  proposed, 
and the need for European intervention, taking into account the principle of subsidiarity. 

Various  Member  States,  in  their  responses,  described  their  national  systems  for 
84. 
regulating over-indebtedness, including the Irish system where the Government tackles the 
problem at local community level, providing consumers with budget-planning training and 
access  to  credit.  Several  Member  States  pointed  out  that  wider  social  problems  are 
involved  in  over-indebtedness,  but  the  Netherlands  stated  that  it  would  be justifiable  to 
include  provisions  in the  Directive  under which  Member  States  would  be  obliged  to  set 
out  measures  preventing  credit  limits  from  being  exceeded.  Others  supported  the 
proposals made in the Report (Spain, Portugal,  Sweden). The UK, on the other hand,  felt 
that  the  Consumer  Credit  Directive  is  not  the  "appropriate  means  of  promoting  wide-
ranging  social policy initiatives" whereas France thought  that  it is a subject  falling  within 
the competence of Member  States. Lastly Iceland,  although not  disagreeing with the idea 
of  a  study  of  the  situation  in  Member  States,  could  not  encourage  a  Community-wide 
intervention. 

85. 
Several  industry  groups  referred  to  subsidiarity,  with  the  Banking  Federation 
stating  that  "Commission  action  should  be  limited  to  facilitating  the  exchange  of 
information  among  interested  parties".  Bankenfachverband  stated  that  debt  is  an 
international  but  not  a  cross-border  problem,  which  lies  "far  outside  the  scope  of 

14  The Danish Consumer Council also wishes the total ban of global sureties. 

15  France 

in  fact  supports  a  more  radical  proposal  suggesting  that  guarantors  should  enjoy  the  same  level  of 

protection as debtors. 

17 

consumer  credit"  and  so  should  be  "removed  from  the  scope  of  the  Commission's 
deliberations". 
The  Savings  Bank  Group,  though  also  recommending  subsidiarity,  made  concrete 
recommendations  to  provide  dependable  and  responsible  advice  on  credit,  an  information 
campaign for consumers on the responsible use of money, awareness of the need for regular 
savings and "suitable individual solutions and assistance when there is over-indebtedness". 

86. 
The  Danish  Consumer  Council  supported  the  idea  of  a  study.  Certain  money 
advice  organisations  (MABS  and  the  Consumer  DebtNet)  support  the  ten  fundamental 
points drawn up by the Consumer Law Group which, inter alia, include better  information, 
the  setting  up  of  independent  authorities  to  assist  over-indebted  households,  free  legal 
proceedings, etc. 

III.  GENERAL ISSUES 

87.  Many  respondents  stressed  the  need  for  effective  transposition  and  adequate 
monitoring  of  national  provisions  -  the  UK  stated  that  it  hoped  that  the  Commission 
would  "explore the adequacy of enforcement  and ensure that adequate national machinery 
is introduced to make sure that the existing legislation is being properly  enforced". 

Concerning  the  general  orientation  of  the  Report  (the  need  to  achieve 
88. 
Community-wide  harmonisation  in the domain of consumer  credit)  some Member  States 
were  supportive  (France,  Ireland,  Spain,  Portugal,  Finland),  but  others  (Denmark, 
Germany,  the Netherlands),  evoking the principle of subsidiarity  and/or the  small volume 
of cross border activity, discouraged such an idea. 

the  need 

89. 
On  the  consumer  side,  one  should  note  the  Danish  Consumer  Association's 
general remarks concerning the need  to introduce  objective  criteria  on the  circumstances 
in which  a creditor  can unilaterally  alter  the  nature  of  a contract  (interest  rate,  charges, 
etc.), 
the  creditor's 
to  adopt  more  stringent  provisions  concerning 
ability/obligation  to  better  assess  the  borrower's  financial  situation,  the  obligation  to 
inform  consumers  of the  reasons  why their  applications  are turned  down  and  finally  the 
legal  basis  for 
the  proposal  for  a  Directive.  The  Swedish  Consumer  Agency 
(Konsumentverket) on  the  other  hand  suggested  that  an  amended  version  of  Directive 
87/102  should  take  on  board  certain  provisions  of  the  Swedish  Consumer  Credit  Act 
(clear  indication  of  the  cash  price  and  credit  charges  in  credit  offers,  conditions  under 
which interest rates may be altered and information  thereof). 

Since  most  banking  organisations  opposed  various  proposals  on  the  basis  of 
90. 
subsidiarity  and  the  essential  freedom  of  choice  of  consumers  and  the  freedom  of  the 
parties  to  the  contract,  it  is  worth  mentioning  the  view  of  Consumer  DebtNet  that  it 
should also be stressed that for millions of citizens of the EU living in poverty, freedom  of 
choice is a luxury which they cannot  afford. 

91. 
Concerning  the  wider  legal  issues  raised  by  the  Report  as  regards  minimal 
clauses,  harmonisation,  "general  good"...,  the  American  Chamber  of  Commerce  and 
Citicorp  support  the establishment  of a true internal market for  consumer  credit  services 
to  be  achieved  by (a) the total  harmonisation  at the  Community  level  of certain  national 
consumer  credit  rules thus  pre-empting  new  national  rules  that  address  the  same  issues 
(cooling-off,  information  to  consumers,  etc.)  and  -  where  total  harmonisation  proves 
impracticable - (b) the application of the mutual recognition principle to  compliance with 

18 

consumer credit regulation thus excluding the invocation of the "general good" exception 
in this area. The Banking Federation,  on the other hand, stated that the main obstacle to 
cross-border  transactions  is  in  fact  the  minimum  clause  since  the  wide  divergence  of 
national  legislation  leads  to  a lack  of  consumer  confidence  on  the  one  hand  and legal 
uncertainty for credit providers on the other. 

Regarding the form  of the contract  and  the  possibility  of its  standardisation, 
92. 
Citicorp, taking  stock  of  US  experiences,  favours  some form  of  non-compulsory  model 
contracts that would not stifle the freedom of banks to develop new products tailored to 
the needs of consumers. 

93. 
Some of the negative responses to  the Report  arise from  misunderstandings  e.g. 
some people felt that a discussion of payment cards in the Report amounted to a proposal 
to include them in the scope of the Directive - this was never the intention. 

IV.  ASSOCIATED ACTION 

In addition to the consultation process the Commission has launched a number of 
94. 
studies on issues raised in the Report, cf. the studies already carried out on non-execution 
of contracts  and intermediaries.  These  studies,  covering  advertising  addressed  to  young 
people, the feasibility of subjecting mortgage credit to the measures included in Directive 
87/102/EEC, usury, data protection, remote banking,  and financial services and door-to-
door selling  will be carried out in the course of the first 6-8 months of 1997. 

V.  THE COMMISSION GREEN PAPER AND COMMUNICATION ON FINANCIAL SERVICES 

Furthermore,  the  review  process  of  the  1987  Directive  cannot  be  isolated from 

95. 
activities in parallel domains. 

The  Commission  published  a  Green  Paper  on  "Financial  services:  meeting  consumers' 
expectations"16 in May 1996 and, as follow-up to this Green Paper, a Communication on 
"Financial  services: enhancing consumer confidence"  in June  1997.17  The latter sets out 
the  results  of  the  consultation  on  the  Commission's  Green  Paper  and  provides  the 
Commission's  response.  The  Communication  emphasises  the  importance  of  credit 
intermediaries and the conclusion of the review process on Directive 87/102/EEC; in this 
context  it  draws special  attention to  two  of the  issues  involved  in this  process,  namely 
mortgage credit and over-indebtedness. 

16  COM(96) 209 final of  22 May 1996. 

17  COM(97) 309 final of 26 June 1997. 

19 

VI.  ANNEXES 

Annex 1: Reactions to the Commission Report on Directive 87/102/EEC 

A. Countries 

I Country 

B 

,DK 

D 

EL 

ES 

F 

IRL 

IT 

LUX 

NL 

0 

P 

SF 

SV 

UK 

ISL 

N 

Response 

25.03.96 

30.05.96 

02.08.95 

24.07.96 

05.07.96 

24.07.96 

26.02.06 

10.07.96 

12.03.96 

15.02.96 

02.05.96 

16.07.96 

11.04.96 

05.07.96 

07.11.95 

21.6.96 

23.1.96 

20 

B. Financial services industry 

i 

Financial services industry 
Associazione Bancaria Italiana 
(M. E. Granata) 

Bankenfachverband 
(Wacket,  Schirnding) 

Barclays 
(Mr Andrew MacThomas) 
Bayr. Hypotheken und Wechsel-Bank 
(Dr. H. Bruchner) 
British Bankers'Association 
(Mr. Geoffrey  Cooke) 

C C CS 
(Mr Malcolm Hurlston) 

C G ER 
(M. Thierry Maniquet) 
Citicorp 
(Clint Walker, Peter Kerstens) 
R. J. Srednicki 

Comité Consultatif Conseil National du Crédit 

Credit Card Research Group 
(Ms Elizabeth Phillips) 

Deutscher Sparkassen und Giroverband 
(Dr. Berndt) 

Eurofinas 
(Mr. Baert) 
Mr. Hopkin 

EUROGIRO 
(Mr John Baden) 

Europay International 
(Mr. Goosse) 
European Association of Co-operative Banks 
(Mr Ravoet) 

European Federation of Building Societies 
(Mr Zehnder) 

I" European Federation of Leasing Companies 

(Mr. Baert) 
European Mortgage Federation 
(Ms Lambert / Ms Hardt) 
European Savings Bank Group 
(Mr De Noose) 
Federation Bancaire 
(Mr. Bômcke) 

-1 

MS 
JJ> 

D 

I Response 

Speech 22 04 96 

i 

Position Paper  12.10.95 

UK 

Position Paper 25.10.95 

D 

TJK 

s 

h  / p 

22  04  % 

Position  Paper  13.10.95 
Speech 22.04.96 

UK 

Speech/Paper 22.04.96 

B 

Speech / Paper 22.04.96 

~ËU 
Intnl 

Draft  Comments  03.10.95 
Position  Paper  13.11.95 
Speech / Paper 22.04.96 

F 

UK 

p 

EU 

jjK 

EU 

EU 
Intnl 
J?JJ 

D 
EU_ 
£r/ 

D oc 

9 5 39 

2 0 0 9-95 
Doc CC 95.56 14.11.95 
Position Paper 26.10.95 

Letter 07 11 95 

Position Paper  12.09.95 

Speech / Paper 22.04.96 

Response  11.12.95 

Letter2108 95 

Letter  14 03 96 

Position Paper  18 12 95 

Position Paper 

19.09.95 

" ]~ 

|  Memorandum 22.11 95 

gjj 

~^ 

21 

Position Paper 
27.11.95 

I Letter  17.10.95 
J 

I 

Finance and Leasing Association 

|  (Mr Cronin) 

Federation Royale des Notaires Belges 
(M. Deckers) 

\UK 

Tg 
I 

Letter 01.09.95 
Briefing 06.10.95 

Letter 29 01 96 

Finansbolagens Fôrening 
(Mr. Hakan Broman) 
Nederlands Associatie voor Direct Marketing, 
Distance Selling... 
(Mr. Geertman) 

The EU Committee of the American Chamber 
of Commerce 
(Mr. Seddon-Brown) 
Zentraler KreditAusschuss 
(Mr Fischer) 

Y~SV 

Letter 21 09 95 

^ 

EU 
Intnl 

£> 

Comments 
21.09.95 

Position Paper  14 11 95 

Position 
07.11.95 

22 

C. Consumer organisations 

Consumer Organisations 

MS  Response 

mKmmmat^BammÊmsummmmËËÈ^mKmm^ÊmuÊmmnBmmBaÊÊÊÊu^aMsmmBBamammMKammmmmmm  •H_-H_8BM_—  _ H H _ a M i K ~ - « a H - n - B _ n n _ _ M - ^ - - - « H _ B - _i 

B E UC 
(Ms.  K. Schweren) 

Consumer DebtNet 
(Ms Joan Conlin) 
Consumers in Europe Group 
(Mr. Stephen Crampton) 

EU 

Speech / Paper 22.04.96 

~EU~~  Position Paper  18.3.96 
Intnl 
UK 
EU 

Submission to House of 
C o m m o ns  Select 
Committee 03.10.95 

Credit  and  Debt  Policy  Group  /  Threshold  JJ^ 
(Ms Mary Higgins) 
Money Advice Association 
(Mr Norman Laws) 
St. Vincent de Paul 
(Mr Liam O'Dwyer) 

1RL 

m 

Letter  31  01 96 

P o s i t i on  P a p er  9  01  % 

P o s i t i on  P a p er  1 1 01.96 

Forbrugerrâdet (Mr Ole Just) 

DK 

Position Paper  14.06.96 

Conseil  National  du  Credit 
Consultatif 

-  Comité  FR 

Position Paper  19.9.95 

Money  Advice  and  Budgeting  Service  -  IRL 
MABS (Ms Maura Dowling) 

Position Paper 26.8.96 

23 

Annex  2:  Resolution  of  the  European  Parliament  on  the  Commission 
Report  on the operation  of Directive  87/102/EEC 

The  European  Parliament. 

having  regard  to the Commission's  report  (COM(95)0117 -  C4-0185/95), 

having regard  to the motion  for a resolution,  pursuant  to  Rule  45(2)  of the  Rules of  Procedure, 
by Mr  Vitorino  on the protection  of citizens who  take out  loans  (B4-0553/95X1), 

having  regard  to  the  1968  Brussels  Convention  on  Jurisdiction  and  the  Enforcement  of 
Judgments  in Civil and  Commercial  Matters1, 

having  regard  to  the  1980  Rome  Convention  on  the  Law  Applicable  to  Contractual 
Obligations^), 

having  regard  to the  1988 Lugano  Convention^), 

having  regard  to  the  report  of  the  Committee  on  Legal  Affairs  and  Citizens'  Rights  and  the 
opinion 
the  Committee  on  the  Environment,  Public  Health  and  Consumer  Protection 
(A4-0010/97), 

A.  whereas  the  Commission  report  is of broad  scope,  since  it  covers  not  only implementation  of 

the  Directive  but  also foreseeable  trends  on  the  credit  market, 

B.  whereas  the  credit  market  is rapidly  expanding  in the  Union, 

C.  whereas, without  prejudice  to the concept  generally  accepted  in the  European  corpus juris  and 
solely for the purposes of consumer  credit,  a new  concept  of  the  citizen  as consumer  should  be 
introduced  with  a  view  to  extending  consumer  protection  to  legal  persons  such  as  small 
undertakings  which,  in the  exercise  of  their  contractual  rights,  find  themselves  in a position  of 
objective  imbalance  comparable  to  that  between  small  savers  and  lending  institutions, 

D.  whereas the limits now imposed  on  and  the costs  incurred  in cross-border  transactions  prevent 
citizens,  as  consumers,  from  benefiting  from  greater  opportunities  to  choose  and  more 
competitive  prices, 

E.  whereas  there  is  a  need  to  guarantee  compliance  with 

the  rules  of  free  competition  in  the 
internal  market  and  whereas  consumers  must  have  the  right  to  choose,  and  to  change  without 
incurring  a penalty,  between  different  products  and  suppliers, 

(') 
(2) 
C) 

OJ  C  189, 28.7  1990,  p.  2 (in  its  latest  version) 
O JL  266, 9.10.1980,  p  1. 
O JL  319,  25.11.1988,  p. 9 

6  /PE  257.131 

G.\PV_SEANC\i"'ROVlSOI\ADOPTES\97-03-ll  en 

2 M 

F.  whereas,  given  the  current  state  of  development  of  the  internal  market  and  the  subsidiarity 
principle, the effectiveness  of Community  legislation  and  the  role  of the  Community  institutions 
should  be  considered, 

G.  whereas the effective  exercise of freedom  of choice  and  real  diversification  of supply  will  make 
efficient  instruments  of  consumer  information  and  education  increasingly  necessary,  so  as  to 
enable  consumers  to  play an  active  role, 

H.  whereas,  furthermore,  effective  free  competition  in  a  European  credit  market  will  involve 
diversification  of supply, proliferation  of suppliers  and  better  dissemination  of services  between 
suppliers  operating  and  living  in the  various  regions  of  the  Union, 

I 

whereas  in  the  transition  to  the  single  currency  -  particularly  in  the  three  or  so  years  of  the 
conversion  phase  -  the  principle  of  contractual  continuity  will  be  essential  to  safeguard  the 
required  stability  of the  financial  markets; whereas  the  welcome  prospect  of a single  currency 
will call for fuller  discussion  of the desirability of adopting  new,  uniform,  Union-wide  legislation 
applicable  to  the whole  credit  industry; 

J.  whereas  Union  responsibilities  in  the  field  of  consumer  credit  are  in  parallel  with  and 
complement  the  policy  pursued  by  the  Member  States,  in  order  to  protect  the  safety  and 
economic interests of consumers;  whereas,  moreover.  Community  law on  consumer  credit  has 
helped  to encourage the adoption  of national  legislative  measures;  whereas  the  Community  will 
need  to  take  action  for: 
-  the  completion  of  the  internal  market; 
-  protecting  the  health,  safety  and  economic  interests  of  consumers; 
-  the  provision  of  adequate  information; 
-  a high  level  of protection  (Article  129a of the  EC  Treaty), 

K.  whereas  the  articles  establishing  the  four  fundamental  freedoms  are today  directly  applicable; 
whereas, under the law as it now stands, the Community  approach  will help to  attain  a high  level 
of  consumer  protection  by  means  of  measures  adopted  as  part  of  completion  of  the  internal 
market;  whereas  credit  policy  in  the  narrow  sense  is  still  a  matter  for  the  Member  States, 
without  prejudice  to  the obligation  of complying  with  Community  law, 

L.  whereas the rule laid down  in  Article  129a of the  EC  Treaty,  in conjunction  with  Articles  2, 3, 
and  3b,  entitles  the  Community  to  intervene  by  exercising  general  'powers  of  guidance', 
specifically  by charting  the  objectives  to be attained,  adopting  measures  providing  for  at  least 
some  degree  of  harmonization,  and  encouraging  cooperation  among  the  national  authorities 
concerned, 

M.  whereas Article  100a of the EC Treaty  is the appropriate legal basis for  harmonization  measures 

which  have  as their object  the  establishment  and  functioning  of the internal  market, 

N.  having  regard  to  the  powers  conferred  on  the Community  institutions  under  the  third  pillar, 

1.  Believes that  the Union  should  employ  every  legal  means  provided  by the Treaties  in order  to 

enable  a European  credit  market  to  come  into  being; 

2.  Believes that the Union should  while upholding  the  principle  of  subsidiarity  pursue  a  legislative 
policy  with  a  view  to  adopting  general  rules  governing  the  European  credit  market  in  the 
medium  term,  laying down  standards  for  expansion  of the  market  without  neglecting  the  need 
to  protect  consumers'  interests,  while  also  stimulating  free  competition, 

is 

be  carefully  assessed 

4.  Considers  that  consumers  generally  do  not  simply  need  more  protective  legislation,  but  rather 
legislation  that  will encourage  them  to  play an  active  role,  and  protect  their  right  freely  to  seek 
and  receive  the  information  that  will  enable  them  to  act  in conditions  of contractual  equality, 

5.  Opposes, however,  - to prevent  disadvantages  for  the  consumer  - the  Commission  proposal  to 
extend  the  scope  of  the  consumer  credit  directive  to 
include  loans  for  renovation  and 
modernization  work  that  are  not  secured  by  mortgage,  since  these  could  then  no  longer  be 
offered  on the (compared  with  consumer  credit,  more  favourable)  interest  terms  for  mortgage 
loans,  or  the  consumer  would  have  to  bear  extra  costs  for  the  creation  and  registration  of 
mortgages; 

6.  Takes the view that  every opportunity  for  setting  up  national  authorities  or  Ombudsmen  of any 
kind  should  be  looked  into,  and  favours  encouraging  the  maintenance  and  development  of 
simple and efficient  arbitration  and court  procedures  to  safeguard  consumers'  rights, taking  into 
account  the  importance  of cross-border  legal  disputes, 

T^  Voices  its conviction  that  self-regulation  systems  could  enable  specific  standards  to be  adopted 

but  could  not  resolve  all  the  existing  problems; 

8. 

Stresses  that  measures  to  standardize  agreements  on  the  basis  of  voluntary,  flexible  codes  of 
conduct  would  be of use if,  and  only  if,  variety  of supply  and  the  possibility  of choice  available 
to  the  consumer  were  not  adversely  affected; 

9.  Considers  that  encouragement  should  be given  to  all  the  various  means  of creating  a  mutual 
obligation  whereby  every  contracting  party  would  have  to  provide  accurate,  complete,  and 
truthful  information; 

10.  Considers  that  all  forms  of  advertising  and  promotion  should  be  the  subject  of more  detailed 
provisions  on  such  aspects  as  the  content,  indication  of  the  nature  of  the  product,  the 
requirement  to include instructions,  and  limits and  safeguards  on  advertising  aimed  at  children, 
provided  that  such  standards  are  not  already  included,  or  capable  of being  included,  in  other 
specific  legal  acts; 

11.  Considers  that,  in  the  case  of  loans  for  the  purchase  of  consumer  goods,  debtors  should  be 
permitted  to  exercise  the  option  of  early  payment,  without  incurring  unwarranted  and 
unnecessary  administrative  costs; 

12.  Believes  that  national  rules  on  the  recovery  of  goods  in  the  event  of  non-performance  of a 
contract  and  on  the  joint  and  several  liability  of  the  creditor  and  the  supplier  must  be 
harmonized  to  the  extent  shown  to  be  necessary  and  compatible  with  the  principle  of 
subsidiarity; 

13.  Considers  that  the  entitlement  to  benefit  from  a specified  cooling-off  period  when  concluding 
credit  agreements to finance consumer goods should  be guaranteed  under uniform  arrangements 
and  time  periods  throughout  the Community  ; 

14.  Points  out  that  practices  such  as  assignment  of  credit,  the  use  of  securities  as  collateral  and 
insurance  to  cover  remaining  debt  should  respect  the  principles  of  freedom  to  enter  into 
contract,  privacy  of contract  and  legal  certainty; 

8  fPE  257.131 

G:\PV_SEANOPROV1SOI\ADOPTES\97-03-Il.en 

2  6 

1 5.  Considers that  Community  measures  should  prevent  phenomena  such  as indebtedness  throuch 
consumer  information  and  education,  secondly,  that  credit  institutions  must  be  allowed  the 
opportunity  to  obtain  information  about  a customer's  solvency,  provided  that  the  law  on  the 
right  of privacy  is  respected, 

16.  Supports  the Commission's  intention  to examine  whether  and  to  what  extent  there  are  problems 
in consumers' dealings  with  credit  intermediaries;  points  out  that  account  needs  to  be  taken  of 
factual  differences 
in  comparison  with  the  first-time  borrower  when  extending  certain 
commitments  laid  down  in  Directive  87/102/EEC  to  guarantors  and  sureties; draws  attention 
to  the  fact  that  credit  advances  in  connection  with  the  issue  of  a  credit  card  are  already, 
notwithstanding  the  present  variety  of  definitions  in  this  area  described  by  the  Commission 
report,  covered  by  the  scope  of  Directive  87/102/EEC  under  Article  l(2)(c); 

17 

Is of the  opinion  that  Community  rules  should  not  be  adopted  to  harmonize  credit  secured  by 
mortgage,  because  mortgage  credit  is  inseparably  connected  with  security  and  application 
procedures,  which  differ  greatly  between  Member  States;  European-level  regulation  of 
mortgage  credit  would  mean  approximating  the  security  and  application  rules of the  Member 
States at the  same  time,  and  hence  ultimately  EU-wide  harmonization  of the  national  civil  law 
provisions, 

1t 

18  Notes  that  the  most  effective  way  of  tackling  usury  -  a disease  of  a market  dominated  by  the 
supply  side -  with any guarantee  of  success  is, in  addition  to  a fully  operational  market,  better 
consumer  information,  education  and  protection  and  tighter  control  by the  national  authorities 
of the  institutions  and  agencies  supplying  credit, 

19  Underlines the importance of providing  effective  conciliation  and  pre-judicial  procedures,  in  so 
far  as  these  may  play  a  vitat  role,  especially  in  cross-border  disputes,  since  they  are 
supplementary  and  capable  of preventing  costly  legal  proceedings  to establish  jurisdiction; 

20.  Believes  that  developing  and  acting  on  all  possible  ways  of  limiting  the  costs  to  contracting 

parties  clearly  constitutes  a  priority; 

21.  Considers,  finally,  that  the  best  means  of  protecting  individuals  is  to  establish  a  system 

guaranteeing  freedom  of choice  under  conditions  of  free  competition, 

22  Calls  on  the  Commission  to  brief Parliament  regularly  on  the  findings  of the  different  studies 
and  research  projects  commissioned  and  to  notify  Parliament  as  soon  as  possible,  without 
allowing  this  in any  way to  obstruct  the  preparation  of  legislative  proposals,  of its  position  on 
the views  adopted  in this House  on  legislative  policy, 

23.  Instructs  its President  to  forward  this  resolution  to  the  Council  and  the  Commission. 

GAPV  SEANCWOViSOl\AD<)PTES\97-0VI  I en 

PE  257  131/  9 

Zl 

ISSN 0254-1475 

COM(97) 465 final 

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ISBN 92-78-24941-6 

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