New Consumer Credit Directive

The Consumer Credit Directive 2008/48/EC (“the Directive”) and the Consumer Credit (EU Directive) Regulations 2010 has introduced new rights and obligations, although The Department for Business, Innovation and Skills has decided that there will be a transitional period and any new agreements entered into after 31 January 2011 must comply with the new requirements.


Peter Hastings, Partner at Rogers and Norton reports on the key changes:


“There are several key changes. For example, Lenders have a duty to provide adequate explanations to consumers about the credit on offer to enable them to decide whether it is suited to their needs and circumstances. Lenders are also obliged to assess the creditworthiness of consumers before concluding a credit agreement or increasing the amount of credit available under an existing agreement. Lenders can decide how to assess creditworthiness, but are required to base their assessment on information obtained from the consumer, where appropriate and from a credit reference agency, where necessary.  If an application is refused on the basis of information from a credit reference agency, the lender must inform the creditor of this when it declines the credit”.

In addition, Jenna Phillips, litigation executive in Rogers and Norton
Commercial Litigation Group comments that:-

“The consumer has the right to withdraw from a credit agreement within 14 days without giving any reason, which replaces the current limited right to cancel some types of agreements. Credit intermediaries must disclose their links to lenders and disclose and agree fees for their services with the consumer. The consumer also has the right to repay an agreement early in part and to receive a reduction in the total cost of the agreement as a result. The existing legal framework for full early repayment has been retained and extended to cover partial early repayment”


Jenna Phillips adds:-


“Advertisements that contain specific information about the cost of the credit need to provide a representative example of a credit offer. The Consumer Credit (Advertisement) Regulations 2010 will dispense with the APR approach. Consumers must be given pre-contractual information in writing according to a specific format set out in the Directive. This information is set out in the Consumer Credit (Disclosure of Information) Regulations 2010 and other contractual information required is set out in the Consumer Credit (Agreements) Regulation 2010” .


Non-business unsecured overdrafts will be subject to the requirements for both pre-contractual and contractual information although an overdraft can be arranged urgently without prior written information. Where a current account allows the account holder to overdraw without a pre-arranged overdraft, information about the charges must be included in the agreement. (Regulation 19 of the Directive). Where a credit agreement is used to purchase goods, the consumer can pursue the creditor for a remedy. The value of the goods must be at least £30,000, the credit agreement must be for £60,260 or less and the consumer must have tried to obtain satisfaction from the supplier first. This supplements s75 of the Consumer Credit Act where the cash price of goods is not less than £100 and not more than £30,000. (Regulation 25 of the Directive). Finally, the total charge for credit and the APR must be calculated in accordance with a specified formula. The formula is different to the one which already applies in the UK, but the result it produces is the same and the assumptions are broadly similar. (Total Charge for Credit Regulations 2010).

Peter Hastings adds “The new Directive will provide more protection for the consumer and places extra burden and restrictions on the lender. I can foresee that there will be an increase in disputes arising from this, especially with pressure on businesses in the current economy”.


Rogers and Norton solicitors and its Commercial Litigation Group act for National and Local Finance Companies and Lenders on such matters.