Consumers should be given two weeks to back out of a loan and be able to pay back money early if they wish, the European Commission said on Monday in its latest proposals to reform credit laws.
The Brussels executive unveiled a third attempt to revamp its outdated 1987 consumer credit legislation to protect consumers across the 25-nation bloc from loan sharks and to avoid tying up the financial industry with red tape.
"This directive makes it simpler for consumers to compare the cost of credit and easier for industry to offer credit across borders," Markos Kyprianou, the executive's Commissioner for Health and Consumer Protection, said in a statement. The aim is to harmonise consumer rights across the EU when they take out loans to buy a washing machine, cooker or other products and services. This time round, the Commission has excluded mortgages from the scope of the new rules because loans for buying a house will be treated separately.
Instead, the rules focus on loans of up to 50,000 euros ($60,720) and on which information should be given to consumers.
A simplified set of rules is proposed for small loans of up to 300 euros. The revised proposal replaces two earlier versions, one of which was substantially amended by the European Parliament in a first reading. The earlier versions were seen by some critics as being so skewed in favour of protecting consumers that credit would have been restricted.
The Commission has sought to define more clearly the advice loan firms must give, and requires all existing databases on consumer credit to be opened up to credit providers.
The latest proposal takes into account changes put forward by parliament, and the Commission hopes a final text will be adopted next year.