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Consumer Credit - European Directive

The Consumer Credit Act implements the European Directive on Consumer Credit.

The 1987 Directive on consumer credit established the Community framework for consumer credit with a view to promoting the setting–up of a common market for credit and establishing minimum Community rules to protect consumers. Following a review of the legislation, the Commission concluded that the Directive no longer reflected the current situation on the consumer credit market and was in need of revision.

In September 2002 the Commission published a proposal for a new Directive on consumer Credit to update and expand the EU wide rules on consumer credit to take on board modern forms of consumer credit and to facilitate the internal market in this sector.

During April 2004 the European Parliament adopted its first reading position on the Consumer Credit Directive.  The European Parliament has substantially redrafted the Directive, in particular they have altered the scope of the Directive and the level of harmonisation. Whereas the Commission had proposed total harmonisation, the European Parliament prefers ‘optimum harmonisation’ which in effect means that Member State would retain the right to go further than the standards laid down in the Directive. However, the rules on APR would be subject to full harmonisation in order to facilitate the internal market.

In October 2004 the Commission adopted an amended proposal for a Directive. The amended proposal contains the European Commission's comments on the amendments adopted by the European Parliament in April 2004. Taking account of the amended proposal, the Presidency will now draft a text for discussion in the Council Working Group. We consulted about this in February 2005

In October 2005 the Commission published a second revised text of the directive. We issued a supplementary consultation on this in March 2006, along with a partial Regulatory Impact Assessment. The Government respoinse to the consultation was published in November 2006.

If you would like to be kept up-to-date about negotiations on the EC Consumer Credit Directive please inform us by responding to: hugh.rawson@dti.gsi.gov.uk