Political agreement on new Consumer Credit Directive

EU lawmakers have reached political agreement on a Consumer Credit Directive (CCD 2) to replace Directive 2008/48/EC.

Find our key-takeaways below:
 

Buy Now Pay Later 

The CCD 2 comes with a wider scope than the current directive and expressly targets BNPL products.

• Existing exemptions that are relevant in particular for BNPL providers (e.g. for loans below the current threshold of 200 € as well as interest-free short-term loans) will be removed entirely.
• Pre-contractual information is required to be provided to the consumer ‘in good time’ before he or she is bound by the relevant loan agreement or offer, including where distance means of communication are used. The Commission had originally proposed ‘at least one day’ before the agreement becomes binding, which would have been more than challenging for digital business models. 
• Specific advertisements (including those encouraging consumers to take out a loan by suggesting that this would improve their financial situation) will be prohibited.
   

High yielding consumer loans

• Contrary to the Commission’s proposal, the CCD 2 will not introduce a mandatory hard cap on interest rates for consumer loans.  
• However, it will be put it in the hands of the Member States to take measures to effectively prevent abuses or excessively high interest rates or total costs – e.g. by introducing hard caps or providing for a usury regime.
• In order to protect consumers from taking out short-term high-cost loans, the scope of the costumer protection rules is extended and exemptions are removed (e.g. no more exemption for small loans; overdrafts to be repaid at short notice).
• Advertisements for consumer loans will have to include a clear and prominent warning regarding the costs involved.
   

Crowdfunding

• Contrary to the Commission's proposal, the CCD 2 will not cover direct crowdfunding credit services or peer-to-peer lending.
• Crowdfunding platforms that act as lenders or loan intermediaries in a B2C context will, however, continue to be covered.