Have Banks gone too far with their 2008 Directive?
ECRC has accompanied the battle around the new Consumer Credit Directive 2008/48/EC. There is no question that consumer protection in general lost this battle when the 2002 draft was totally withdrawn and replaced by the neo-liberal information Directive which instead of bread and butter for debtors in consumer credit gtves information on bread and butter. Five times now consumer will be informed about the various oppressive conditions they are confronted when (often inescapably ) forced to at least partly to refinance their existing old debts when asking for the next credit. But even with this information only approach the two most significant pieces of information are withhold: (1) an APR which covers all cost incurred onto the consumer when taking out his credit including such bye products where kick-back provision provide for extra profits of the bank and (2) a comprehensible repayment plan which gives consumers the chance to predict how much their monthly income will be burdened with debts.
Now following the announcements of the European Consumer Credit Research Institute, which is somehow a speaker of collective bank interests in Europe on related matters in EU policy, even banks seem to assume that they made a mistake. Since the new CCD contains no substantive regulations at all it is somehow an empty bottle and obsolete. Its claim to to maximum harmonisation does not provides the hoped banker protection against consumer protection since member states faced with the repercussion of the crisis, with usury and overindebtedness, assume that they are still in charge to give own legal answers to the present debtors' crisis.
National Legislators have started to fill the Loophole left by Brussels
France has passed a harsh credit card law, Germany wants to reduce insolvency procedures to three years, Italy has obliged those banks who used state help to help unemployed debtors to overcome the crisis, Portugal has passed consumer bankruptcy, Greece is following and Obama's new interventions into the mortgage markets pave the way for other states to look for means of substantive consumer protection in consumer credit.
The absence of EU-legislation has therefore become an impetus for national legislators to do something on their own. The high political investments of European banks in Brussels do not seem to pay off if the center for legislative efforts is reallocated to the Member States which always showed more concern for social consumer protection than the EU.
This is why ECRI publicly announces its new activity in formerly untouched areas when it writes:
"But with Member States moving ahead with partly very rigid regulations, the question remains if the lack of concerted EU action will further endanger the common internal market project that has already taken a big hit by the financial crisis."
In other words banks now want to rush and create a new CCD with more substantive rules than before concerning such endangered species like credit card and revolving credit, payday loans or harsh debt collection practices and life long dependencies due to the lack of effective consumer bankruptcy legislation.
In their 2010 work programme the EU-Commission does not even mention consumer credit but seeks answers to the financial crisis by focussing on bank supervision and systemic risks with regard to investment products. Debtors protection, the key to a sane financial market of the future and to secure assets is regarded as a national issue.
The maximum harmonisation rule thus works to the contrary for the banks since it does not cover such areas where there is no EU-regulation. The earlier option of mutual recognition where the weakest rules will make the pace would be much more favourable as the American consumer protection disaster after in financial services shows when Reagan abolished solid state legislation in Wisconsin, New York and California by this rules.
ECRC Principles of Responsible Credit could help
National legislation for more social consumer protection does not harm European integration but builds a solid ground for it. Only the integrated efforts of large and often irresponsible banks to exploit the poor legal situation of consumers and debtors would be threatened. But the EU needs examples and experience and no longer ideologists of free markets who explain why the average consumer will like usurious products and mighty banks and will finally profit from deregulated markets.
If the crisis has taught us that trust needs control we should ask the banks to be more honest and look for what we started with the international ECRC conferences. The time where a nice name suffices in Brussels to get the Commission on board with the Bankers' Round Table seems to be over. To exercise influence in Brussels also ECRI should know that it needs more legitimacy than a claim that it is "an independent research institute managed by the Centre for European Policy Studies (CEPS)". In fact on its website one can read that (click here) "internationally well-known banks and specialized credit companies, a credit bureau and a credit managment service company" are their members. Indeed BNP Paribas Personal Finance, Citibank Belgium, Cofinoga,,Cofidis, Findomestic Banca Grupo, BBVA International Personal Finance Intrum Justitia Provident Financial RCI Banque Schufa Holding AG (whose members are all German Banks) Sofinco Visa Europe are no guarantee for independent research.
We invite these banks to support the next international conference in 2011 where we could find ways which help to develop Europe but cannot be misused by the well equipped supplier side to just cut into necessary national consumer protection efforts.
The seven principles of responsible credit have been formulated to show that their is a solid starting point for stakeholders and that we can come to solutions which help to unify markets on one hand but on the other make them safe, secure and responsible.