EU plans to make it easier for people to shop across borders for loans to buy goods and services risk running aground over how member states will apply the new rules locally, EU and industry officials said.
The 25-nation European Union is updating a 1987 law on consumer credit to give people greater and cheaper choice of loans up to 50,000 euros ($60,000). Consumer credit growth is seen by some experts as helping to boost economic expansion.
The executive European Commission reworked its original proposal after a first reading in the European Parliament, but member states, which have joint say with parliament, still failed to agree on a crucial aspect, an EU official said.
The stumbling block is article 21, which sketches out which provisions are standardised across the bloc, and which parts states should have greater flexibility in applying.
For example, information such as how the interest rate on a loan is calculated would be standardised, but member states could continue with their own rules on compensating credit firms for early repayment of loans.
"The distinction is quite clear in the proposal but less clear is how it will be transposed and applied in different countries," a consumer credit industry source said.
There is a fear of ending up with a complex situation where parts of the bill would be regulated by the EU, parts by the credit firm's home state, and parts by the consumer's country.
"It seems there is low probability that political consensus will be reached before the summer," the source added.
Last week, member state officials abandoned attempts to come up with a compromise for a meeting of competitiveness ministers, and now hope to present a text to the next meeting on May 28-29. "On article 21, there were profound divergences and I don't know if ministers can find a way out. So far there is no agreement on article 21," an EU official said.
There is some talk that the Commission, which wants to withdraw proposals that get bogged down for too long without agreement, is losing patience.
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