Directive on Credit Agreements for Consumers (2008/48/EC) – What You Need to Know

The Directive on Credit Agreements for Consumers (2008/48/EC) is a piece of EU legislation aimed at protecting consumers who enter into credit agreements with lenders. It covers a wide range of credit products, from credit cards and personal loans to hire purchase agreements and car finance deals. In this article, we’ll look at the key provisions of the directive and what they mean for consumers.

Scope of the Directive

The Directive applies to credit agreements between lenders and consumers where the total amount of credit is between €200 and €75,000. It also covers credit agreements where the credit is provided in the form of overdraft facilities, as well as credit agreements where the lender and the supplier of goods or services are the same entity. It does not, however, apply to mortgages or loans secured by a mortgage.

Pre-contractual Information

The Directive requires lenders to provide consumers with clear and concise information about the credit product before they enter into the agreement. This includes the total cost of credit, the annual percentage rate (APR), the interest rate, and any fees or charges associated with the credit, such as arrangement fees or early repayment charges. Lenders must also provide consumers with a representative example of the credit agreement, which must include the total amount of credit, the duration of the agreement, and the APR.

Right of Withdrawal

Consumers have the right to withdraw from a credit agreement within 14 days of entering into it. They do not have to give a reason for the withdrawal, and the lender cannot charge any fees or penalties for the withdrawal. The 14-day period begins from the day the consumer receives the contractual terms and information about their right to withdraw.

Responsible Lending

Lenders must assess a consumer’s creditworthiness before entering into a credit agreement with them. This means that they must take into account the consumer’s income, expenses, and other debts to ensure that they can afford the credit. Lenders must also provide clear and concise information to consumers about the credit product, including any risks associated with it.

Advertising

The Directive contains rules on advertising of credit products. Advertisements must include certain information, such as the total cost of credit, the APR, and any fees or charges associated with the credit. Advertisements must also be clear and not misleading, and they must not promote irresponsible borrowing.

Conclusion

The Directive on Credit Agreements for Consumers (2008/48/EC) is an important piece of EU legislation aimed at protecting consumers who enter into credit agreements. It provides consumers with clear and concise information about credit products, ensures responsible lending, and protects consumers from misleading advertisements. If you’re considering taking out a credit agreement, make sure you understand your rights under the Directive and that you shop around to find the best deal for you.