today, but consumer minister Melanie Johnson warned that aspects of
the proposals must change if the public are to fully benefit.
MEPs in Brussels said:
'I welcome the revision of the Consumer Credit Directive. The
existing directive is based on a mid 1980's market place. As a
result, it does not fully address some of the newer products and some
of the new ways in which products such as credit cards are now used.
'The revision is a major redraft, intended to reflect modern credit
markets, increase lender and borrower certainty, and promote the
single market through a high level of harmonisation and a high level
of consumer protection.
'But we do see serious difficulties with some aspects of the
Directive as it is currently drafted.'
Proposals for changes to the European Consumer Credit Directive are
currently published in draft. Addressing the Consumer Credit
Directive Seminar, Miss Johnson identified significant changes that
need to be made to the draft. These are:
- To exclude all loans secured on property from the scope of the
- ensure continued exemption of UK credit unions from the scope of
the Directive; and
- retain joint and several liability protections for UK consumers.
On loans secured on property, Miss Johnson said:
'In my view, all mortgages should be excluded from the scope of the
Directive. Loans secured on property differ in complexity from
consumer credit. The lending process is different. And the risks
associated with secured loans are very different to other forms of
consumer credit. To try to include them within a 'one size fits all'
directive risks ending up with a regime which over-regulates consumer
credit, while providing insufficient protection for mortgages.'
She also argued that credit unions should be excluded from the scope
of the Directive:
'Credit unions provide an extremely valuable service to consumers,
who very often are the most vulnerable in society, and don't have
access to mainstream credit. But credit unions in the UK are small
and often run by volunteers. They would not be able to cope with the
full requirements of the Directive.'
The Consumer Credit Act currently gives a UK consumer using a credit
card an equal claim against the card issuer and the supplier in the
event of a dispute about goods or services supplied. Under the
proposed Directive, this protection would be lost.
Miss Johnson said:
'I am not prepared to see this important and valuable piece of
consumer protection removed. My officials are working to ensure both
the Commission and other member states recognise the considerable
benefits this protection brings for consumers and indeed for
creditors through encouraging consumers to use their cards and gain
Notes to editors:
1. The European Commission published its proposal for a revised
Consumer Credit directiveon 11 September 2002. The revision is a
major redrafting of the original 1987 Directive to reflect modern
credit markets, increase lender and borrower certainty, and promote
the single market through high level maximum harmonisation.
2. Melanie Johnson was speaking at the Consumer Credit Directive
Seminar at the European parliament, Brussels on Tuesday 3 December