How are Personal Loans Regulated in Europe
The Consumer Credit Directive (CCD) is responsible for regulating personal loans in the Europe. CCD started operating in May 2008 under the authority of the European Council. The purpose of its establishment is to protect European consumers from fraud in all kinds of unsecured credit products. It provides educational materials to help consumers to understand about each of the different types of unsecured loan products. Examples of unsecured loans are personal loans and credit card where there is no requirement to put in a security deposit.
Many consumer loan providers have make the necessary preparations in order to adhere to the regulations of the Consumer Credit Directive. One of the changes that the Consumer Credit Directive has implement is that all consumer loans providers are obliged to use representative APR along with a representative example for all their advertised loans products. This changes started to take place on the 1 February 2011. Previously, the lenders use a typical APR. It was a requirement to issue the typical APR to 66% of the consumers but lenders are required to assign the representative APR to at least 51% of the consumers now.
Lenders must provide a representative example to show the range of loan amount, and loan term of which the representative APR will be applied. The lender will also show the monthly repayment and total amount that need to be repaid for the unsecured personal loan. For credit cards, it will show a representative example of the annual spending, annual fee and APR interest rate. The CCD requires lenders to provide these information to the consumers so that they can perform comparison and choose the loan offer that offers the best deal. Customers can ask the lenders for a statement of account at least once per month on a loan with fixed interest rate.
Consumers have the right to withdraw from a loan agreement within 2 weeks. You can also make early repayment to pay down your debt faster. The early repayment fee is about 0.5% – 1%. The CCD has introduced a number of rules to provide better protection for credit card holders. For example, lender and suppliers are required to ensure that you receive the goods/services if the amount spent is in between £100 to £30,000. You will receive additional protection for spending an amount in between £30,000 and £60,260 annually on the credit card.
If you get turned down for a loan or credit card, the lender is obliged to send a letter to inform you about their decision to reject your application. Besides, they also have to provide information on the credit reference agency that supply your credit report along with their contact details. In this way, you can request the credit report from the credit reference agency and dispute any error record you find on