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In recent months there has been an increased focus at a European Union (hereinafter “EU”) level on conduct-related issues, fair treatment of borrowers and responsible lending practices. Irresponsible lending and mis-selling in the consumer credit market are key causes of over-indebtedness, resulting in negative implications for individual consumers and for long-term economic stability. Our Risk team explore the issues below.

In March 2021, the European Banking Authority (hereinafter “EBA”) released its most recent consumer trend report, identifying over-indebtedness as a key trend in the consumer credit market.

Finance Watch is a European non-governmental organisation, who defend the public interest in the making of financial regulations. In February 2021, Finance Watch released the results of a study conducted to identify the reasons for mis-selling and irresponsible lending in the consumer credit market. The study focussed on 89 case studies collected from three Member States (including Ireland) and the central EU legislation regulating consumer credit, the Consumer Credit Directive (hereinafter “CCD”). It is anticipated that the study will reinforce debate and encourage reforms to the CCD. The following consumer credit products were considered:

  • Payday loans ≤ €180; 
  • Car loans ≤ €20,000; 
  • Personal loans ≤ €2,500; and 
  • Revolving credit (a credit which is automatically renewed as debts are paid off e.g. credit cards) ≤ €1,500.

The findings and recommended revisions to the CCD identified by Finance Watch are broadly in line with those identified by the European Commission (hereinafter “the Commission”) as part of its public consultation process.

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Consumer reform series