Cross-border credit a step closer after EU vote

CASH-STRAPPED consumers got some good news yesterday after the EU moved one step closer to enabling 500 million EU citizens to avail of better and cheaper loans.

The European Parliament in Strasbourg voted in favour of introducing an EU directive to facilitate consumers obtaining credit across EU borders.

The proposed legislation aims to make it easier for consumers to shop around for the best offers from banks or credit companies in another European country. It is expected to come into effect by early 2010.

The legislation will cover loans from €200 to €75,000, but excludes mortgages and charge cards.

MEPs voted in favour of the new consumer credit directive following a long debate in which considerable divisions arose about the level of penalties for early repayments on credit loans.

However, a compromise proposal was agreed that will see people who pay back loans early facing a maximum penalty of 1% of the outstanding loan or 0.5% if it is repaid within 12 months of the end of the loan.

The EU Commissioner for Consumer Protection Meglena Kuneva welcomed the result of yesterday’s vote

“This consumer credit directive is necessary to start to break open the potential of the internal market and boost competition and choice,” said Ms Kuneva.

The proposed EU directive will also allow consumers to cancel any credit contract within 14 days without having to give any reason or pay any charge.