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EU member states back new rules on consumer loans

The European Union member states agreed on Monday to set EU-wide rules on consumer loans, which will facilitate transnational borrowing by requiring lenders to be more transparent.

The main effect of the new rules would be for the banks to provide standard, comparable information to customers across the EU taking out a credit loan. Consumers will be assured access to key facts and figures in advertisements. Before any credit agreement was concluded, financial institutions must give customers an information sheet. The so-called European Credit Information Form will be uniform throughout the EU and contains essential information on the credit, such as interest rates, amount, number and frequency of payments. When they conclude the contract, consumers will receive comprehensive information so that they have a reference document describing their rights and their obligations. The new rules contain a detailed list of information requirements. And there will be a new single EU-wide method for calculating the annual percentage rate of charge, so consumers can see the real cost of credit and will by comparing one single figure be able to find out what is the cheapest credit offer. The proposed directive, which still has to be approved by the European Parliament, also sets common standards on a right of withdrawal, so consumers can change their mind after conclusion of a contract, without having to give any reason and without any charge.

At present, only Germany and a few other member states allow consumers to withdraw from a credit agreement within 14 days. In the future, the right of withdrawal will apply throughout the EU. In addition, the new rules limit the early repayment penalty that credit providers can demand in cases where consumers repay their credit earlier than initially agreed. "This agreement delivers clear practical advantages to Europe's consumers. For example, in the future it will be possible to make genuine comparisons among credit offers throughout Europe. Credit providers will be subject to uniform transparency rules, and the annual percentage rate of charge for credit will be calculated in accordance with uniform standards," said German Federal Minister of Justice Brigitte Zypries, whose country is holding the EU presidency. (