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Plans to update credit laws across Europe were given a broad welcome...
Plans to update credit laws across Europe were given a broad welcome

today, but consumer minister Melanie Johnson warned that aspects of

the proposals must change if the public are to fully benefit.

Miss Johnson, speaking with industry and consumer representatives to

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

this protection.'

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


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