The Consumer Credit Directive 2011

Summarising the Key Points

The CCD has been created to try and harmonise the way credit is offered and governed throughout the EU. Although UK credit has been regulated using the Consumer Credit Act since 1974, it was decided that the CCD should be integrated into the mainstream for unsecured credit.

This means that various elements have changed in the way credit is governed, affecting the entire chain from consumer through motor dealer and lender. The main points can be summarised as follows.

Responsible Lending

• Lenders must ensure a borrower has been properly assessed for suitability and affordability before offering credit. Some lenders will now insist on more rigorous proof of income and may request expenditure information to assess disposable income.
• If a lender refuses credit to an applicant for reasons related to credit information, then the lender must make this information available to the applicant along with details of the credit reference agency used.

Standard European Consumer Credit Information (SECCI)

• This may also have the title of Pre Contract Information.
• Information to be presented to any applicant after an offer of credit has been made detailing the exact terms and implications of the credit offer.
• The applicant is entitled to take the SECCI away for consideration and cannot be asked to proceed until they have had what they consider to be a satisfactory period to consider the terms.
• Should any terms change pre-signing then the SECCI must always be reproduced to reflect this.

Adequate Explanations

• It is also the responsibility of the credit intermediary to ensure that the applicant is made aware of key information prior to signing which is additional to the SECCI.
• This usually takes the form of a document that must be orally explained to the applicant.
• Different lenders have different names for this and some will ask for written confirmation that this task was completed, others won't.

Right of Withdrawal

• Once the agreement has been signed and executed, the borrower still has the right to withdraw from the agreement within 14 days of the date the agreement is executed.
• This allows the customer to exit the credit agreement but does not affect the purchase of the vehicle and therefore under normal circumstances the customer must then find an alternative way of funding the purchase.
• The lender is entitled to charge daily interest until settlement is received.

Partial Settlement

• The borrower is now entitled to make lump sum payments towards their agreement at their discretion.
• The borrower must make it clear that this is a partial settlement and then the lender will offer to reschedule the term or monthly payments to reflect the payment.

Please appreciate that these are merely summarised points of interest from the directive. The full document can be accessed here from the Department of Business Innovation and Skills:

European Consumer Credit Directive