The aim of the directive is to harmonise credit laws, regulation and administrative provisions across the European member states. The CCD has been going through the commission since 2002.
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Key parts of the agreement include a restriction on the conditions under which lenders can impose early repayment charges, along with a cap on the rate of charges; the right of consumers to have a 14-day period to withdraw from a contract without giving a reason; and pre-contract information for mortgages has been accepted in the form of a ‘Standard European Consumer Credit Information’ similar to the European Standard Information Sheet.
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Along with this, the definition of the annual percentage rate of charge has been widened and will be calculated on the basis of the total cost of credit, which will include the fees and taxes paid by the consumer and known to the creditor, though not notary fees.
Bill Warren, compliance director for Complete Mortgage and Loans Service, commented: “This is undoubtedly going to impact the pricing of products. It could put prices up and make it really difficult for lenders to position themselves because they will look expensive. Arrangement fees could go up and lenders will have to be very careful with Financial Promotions and declaring arrangement fees.”
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It is expected that the Council will reach a formal agreed position during the next month, with the expectation that some parts of the CCD could come into force at the same time as MiFID on 1 November.
