Consumers get go-ahead to access loans across EU

EU MINISTERS have cleared the way for consumers to take out loans of up to €100,000 from banks and lenders in other member states.

Lenders in all 27 countries will have to give an identical, easy-to-understand, full list of the costs involved, while there will be no financial penalty for early repayment of sums up to €10,000.

The European Consumer Credit Information service will also help citizens to shop for the best-value loan throughout the EU, even if it is in a country with a different language.

Consumer Commissioner Maglena Kuneva welcomed the ministers’ decision in Brussels yesterday. Her spokeswoman Helen Kearns said: “These new rules will make it easier and more attractive for consumers to shop around the EU and for banks to offer their products outside their home base.”

The consumer loans market is worth €800 billion, but less than 1% of borrowers shop in another EU member state for loans. Yesterday’s agreement, which is due to become law in two years’ time in each country, is expected to considerably boost this number.

The legislation will ensure the same standard list of essential information is included in advertisements throughout the EU, including fees. Lenders will have to give consumers all the necessary information to allow them to compare offers including the annual percentage rate of charge. Their contract will have to include information on their rights and obligations.

They will be able to change their mind about taking the loan, without having to give a reason, within 14 days. There will be a uniform method for calculating the annual percentage rate of charge throughout the EU.

Lenders cannot penalise anybody who wises to repay loans of up to €10,000 early, although the ministers decided the details would be left to individual member states. It also leaves the way open for lenders to penalise those repaying larger loans of up to €100,000 early.

German Justice Minister Brigitte Zypries, who chaired the meeting, said people shop around the world now for goods on the internet.

“Why shouldn’t the credit for these purchases come from another member state of the European Union? Now banks face the challenge of gaining the necessary trust of consumers in other member states.”