Droit bancaire et financier

Adoption of the EU Consumer Credit Directive II

In its 2020 work programme, the European Commission announced that it would revise Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers (Consumer Credit Directive I). The aim is to protect vulnerable consumers in the digital transition from over-indebtedness.

As a reminder, the Consumer Credit Directive I harmonises EU rules regarding consumer credit for purchases of goods and services, such as loans granted for personal consumption, overdrafts and credit cards. It does not apply to credit arrangements guaranteed by a mortgage (regulated by Directive 2014/17/EU) or credit for the purpose of acquiring land or property. Moreover it lays down rules on standard information to be provided in advertising for credit; pre-contractual information consumers are required to receive before signing a contract (such as the annual percentage rate and the total cost of the credit); information that needs to be included in the contract itself (including some rules on the assessment of consumers’ creditworthiness). It also gives consumers a 14-day right of withdrawal and the right to make an early repayment.

On 30 October 2023, Directive (EU) 2023/2225 of the European Parliament and of the Council of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC was published in the Official Journal of the EU (Consumer Credit Directive II).

First, the new Consumer Credit Directive II expands its scope beyond Consumer Credit Directive I, encompassing products like « buy now, pay later, » where the purchase price is to be settled interest-free and without any other charges within 50 days of delivery.

Furthermore, Consumer Credit Directive II broadens its coverage to include loans below EUR 200 and up to EUR 100,000, while Consumer Credit Directive I covers credit agreements ranging between EUR 200 and EUR 75,000. Additionally, it includes unsecured (not secured either by a mortgage, or by another comparable security commonly used in a Member State on immovable property or by a right related to immovable property) loans exceeding EUR 100,000 for renovating residential immovable properties, and interest-free credit and without any other charges.

Consumer Credit Directive II also applies to: (i) hiring or leasing agreements with an option to buy; and (ii) credit agreements in the form of an overdraft facility with a one-month repayment period.

Other notable changes include tailored information requirements for digital services, emphasizing readability on digital media. Consumer Credit Directive II further introduces provisions to enhance consumer protection,

  • focusing on precontractual information (such as the total amount of the credit and its borrowing rates which must now be stated in the first part of the Standard European Consumer Credit Information form of which the content must be clear, legible, and adaptable to mobile phone screens) and,
  • improving creditworthiness assessment to prevent irresponsible lending (credit can now only be made available to the consumer if the result of the assessment is positive, except for, for example, loans for healthcare expenses and student loans) and over-indebtedness of consumers.

Moreover, it establishes a unified framework for linked credit agreements. In cases where the consumer exercises the right of withdrawal concerning the purchase agreement, the linked credit agreement is revoked concurrently. The national law governing linked credit agreements will however remain unaffected by this framework and certain national distinctions regarding the treatment of linked contracts will thus persist.

Member States are mandated to introduce measures preventing abuse (such as caps), ensuring consumers are not subjected to excessively high borrowing rates, annual percentage rates, or total credit costs.

Consumer Credit Directive II also prohibits exploitative practices, such as tying, pre-ticked boxes or unsolicited credit sales and establishes new rules of conduct for lenders, including guidelines for remuneration policies. Advertisements that encourages taking out consumer loans, by suggesting that these improve the financial situation, are prohibited.

Recognizing the significant impact of enforcement proceedings, Consumer Credit Directive II introduces debt advice services and requires proactive credit risk management by creditors, promoting reasonable forbearance (by taking into account the consumer’s individual circumstances) before initiating enforcement proceedings.

Member States must adopt and publish, by 20 November 2025, the laws, regulations and administrative provisions necessary to comply with Consumer Credit Directive II. Consumer Credit Directive I will be repealed with effect from 20 November 2026, although it will continue to apply to credit agreements existing on 20 November 2026 until their termination.

Nicolas Michiels (Advocaat Loyens & Loeff, Vrijwillig Wetenschappelijk Medewerker VUB)

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