Explanatory Memorandum to COM(2021)347 - Consumer credits

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This page contains a limited version of this dossier in the EU Monitor.

dossier COM(2021)347 - Consumer credits.
source COM(2021)347 EN
date 30-06-2021


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

Directive 2008/48/EC on credit agreements for consumers (‘the Consumer Credit Directive’ or ‘the Directive’), amended in 2011, 2014, 2016 and 2019 1 , established a harmonised EU framework for consumer credit, to facilitate the emergence of a smoothly functioning internal market in consumer credit and provide a high level of consumer protection in order to ensure consumer confidence.

A REFIT Evaluation 2 in 2018-2019 found that the 2008 Directive’s objectives, namely ensuring high standards of consumer protection and fostering the development of an internal market for credit, are still relevant in the context of a regulatory landscape that is significantly fragmented across the EU and have been only partially met. Such fragmentation, together with legal uncertainty due to the imprecise wording of some provisions of the Directive, hamper the smooth functioning of the internal market for consumer credit and does not guarantee a consistently high level of consumer protection.

Since the adoption of the 2008 Directive, digitalisation has profoundly changed the decision-making process and the habits of consumers in general, who now want a smoother and faster process for obtaining credit and often do so online. This also affects the lending sector, progressively getting digitalised. New market players, such as peer-to-peer lending platforms, are offering credit agreements in different forms. New products, such as short-term high-cost credit, have appeared. Digitalisation has also brought new ways of disclosing information digitally and assessing the creditworthiness of consumers using automated decision-making systems and non-traditional data.

The COVID-19 crisis and the resulting confinement measures have also disrupted the EU economy and had a major impact on the credit market and consumers, especially vulnerable ones, making many EU households more financially vulnerable. Conversely, the crisis has also accelerated the digital transformation. Amid the COVID-19 crisis, Member States adopted a series of relief measures that seek to alleviate the financial burden of citizens and households, such as loan repayment moratoria that were generally extended to consumer credit.

Against this background, the Commission announced a review of the Consumer Credit Directive in its Work Programme for 2020. In the revised Work Programme adopted in the context of the COVID-19 pandemic the adoption date of the review was postponed to the second quarter of 2021 3 .

• Consistency with existing policy provisions in the policy area

Consistency with existing policy provisions would be guaranteed in the proposal.

Unfair terms in consumer contracts are regulated by Directive 93/13/EEC concerning unfair terms in consumer contracts, which provides that contractual terms not individually negotiated are not binding on the consumers if, contrary to the requirement of good faith, they cause a significant imbalance in the rights and obligations of consumers on the one hand and sellers and suppliers on the other hand, to the detriment of the consumers. This general requirement is supplemented by a list of examples of terms that may be regarded as unfair. Directive 93/13/EEC applies in parallel to other consumer protection rules under Union law.

Directive 2002/65/EC on the distance marketing of financial services regulates consumer credits currently exempted by the Consumer Credit Directive scope which are sold at distance, e.g. online. The Directive is currently under review, as announced in the Commission Work Programme 2020.

Misleading advertising is regulated by Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market and Directive 2006/114/EC concerning misleading and comparative advertising which applies to relations between traders. These rules do not however take into account the specificities of consumer credit or address the need for consumers to be able to compare advertising.

Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation, ‘GDPR’) sets out the rules applicable to the processing of personal data, strengthening individuals fundamental rights and clarifying rules for companies and public bodies. The principles of data minimisation, accuracy, storage limitation as laid down in Article 5 of the GDPR govern the use of data to conduct creditworthiness assessments. Without diverging from the GDPR, this proposal aims to address the concerns identified in the processing of personal data that are specific to practices observed in the consumer credit market, i.e. the use of alternative sources of data for creditworthiness assessments or the transparency of assessments carried out using machine learning techniques.

Consistency with other legislation, such as the amendments introduced in, amongst others, Directive 2005/29/EC by Directive (EU) 2019/2161 on better enforcement and modernisation of Union consumer protection rules, would also be guaranteed in the proposal, which includes provisions in line with that Directive.

In 2020, the Commission adopted a Digital Services Act package . It includes a Digital Services Act amending Directive 2000/31/EC (the e-Commerce Directive) and introducing a horizontal framework for intermediary services, and a Digital Markets Act introducing rules for platforms acting as ‘gatekeepers’ in the digital sector.

In 2021, the Commission also published a Proposal for a Regulation laying down harmonised rules on artificial intelligence 4 , to promote the uptake of artificial intelligence (AI) but also to address the risks associated with certain uses of AI.

• Consistency with other Union policies

The objectives of the proposal are consistent with the EU’s policies and objectives.

The proposal is consistent with and complementary to other EU legislation and policies, particularly in the area of consumer protection, such as Directive 2011/83/EU on consumer rights, Directive 2013/11 on consumer Alternative Dispute Resolution and Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property, regulating mortgage credit agreements (the Mortgage Credit Directive).

In 2018, the Commission also published a Proposal for a Directive on credit servicers, credit purchasers and the recovery of collateral 5 , which is currently being negotiated by the co-legislators.

In September 2020, the Commission adopted a digital finance package , including a digital finance strategy and legislative proposals on crypto-assets and digital resilience, for a competitive EU financial sector that gives consumers access to innovative financial products while ensuring consumer protection and financial stability. Consistently, this proposal aims to modernise consumer credit rules in order to cater for changes brought about by digitalisation. It also complements Regulation (EU) 2020/1503 on European crowdfunding service providers for business, as that regulation does not apply to crowdfunding services for consumers.

The Treaty on the Functioning of the European Union (TFEU/the Treaty) provides for action to ensure the establishment and functioning of an internal market with a high level of consumer protection as well as the freedom to provide services. The cross-border provision of consumer credit is still hindered by several obstacles.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The legal basis for the proposed directive is Article 114 TFEU on internal market completion, with due regard to Article 169 TFEU 6 . It confers upon the EU the competence to enact measures for the approximation of national rules regarding the establishment and functioning of the internal market. By creating a high level of consumer protection, the proposal aims to help the internal market function smoothly.

• Subsidiarity (for non-exclusive competence)

The subsidiarity principle applies if the proposal does not fall under the exclusive competence of the EU 7 .

The objectives of the proposed action cannot be sufficiently achieved by Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the EU.

The Treaty provides for action to ensure the establishment and functioning of an internal market with a high level of consumer protection as well as the free provision of services. Such a market for consumer credit is still limited because of several obstacles. These obstacles restrict the level of cross-border supply and demand activity, reducing competition and consequently choice for consumers.

EU action would ensure a consistently high level of consumer protection and a clearer and more harmonised legal framework for businesses, lowering barriers for providing credit in other Member States (through direct cross-border provision or the establishment of subsidiaries).

With digitalisation, and the potential entry into the credit market of new digital actors, the cross-border provision of credit is expected to increase. This will make common EU rules fit for the digital age both more necessary and more effective for achieving EU policy objectives.

• Proportionality

The proposal does not go beyond what is strictly necessary to achieve its objectives. It does not regulate all aspects of lending and borrowing but focuses on key aspects of the consumer credit transaction in order to facilitate the development of cross-border service provision and protect consumers in this context.

The proposed rules have been the subject of a proportionality test to ensure appropriate and proportionate regulation. They would entail costs for providers but would also represent an ambitious and future-proof approach leading to higher benefits for consumers and society in general.

• Choice of the instrument

The chosen instrument is a directive repealing Directive 2008/48/EC.

A directive is binding as to the result of achieving the functioning of the internal market, but it leaves to the national authorities the choice of form and methods. 8 The proposed directive will replace the 2008 Directive but retain many of its elements. This will enable Member States to amend the legislation in force (as a result of having transposed Directive 2008/48/EC) to the extent necessary to ensure compliance, hence minimising the impact of such a reform on their legislative systems. The proposed directive is a full harmonisation instrument in the areas it covers, however in some areas some regulatory choices are left to the Member States.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

In 2014, the Commission presented a report on the implementation of the Directive 9 , for which it undertook a mystery shopping exercise and did a consumer survey to assess compliance with the Directive. The report concluded that there was a need to continue monitoring the enforcement of the Directive.

In 2020, the Commission presented another report on the implementation of the Directive 10 , to present the key results of the 2018-2019 REFIT Evaluation 11 as well as the lessons learnt from the application of the Directive since its adoption. The report stressed that the 2008 Directive’s objectives are still relevant and that it has been partially effective in ensuring a high level of consumer protection and the emergence of a smoothly functioning internal market. The reasons the Directive has been only partially effective are both the Directive itself (for instance, imprecise wording of certain articles) and external factors, such as its practical application and enforcement in the Member States and aspects of the consumer credit market it does not cover. The evaluation identified a number of shortcomings related to the scope of application of the Directive, its definitions and terms that are sometimes unclear, information obligations not adapted to digital media, a lack of clarity in the provisions on creditworthiness assessment resulting in insufficient protection for consumers, and differences in enforcement.

• Stakeholder consultations

In the past few years, the Commission has undertaken several consultation activities on rules applicable to consumer credit at EU level. Stakeholders were consulted for the REFIT Evaluation, the results of which were published in 2020, and for the impact assessment conducted for the Directive’s REFIT Review. As part of the REFIT Evaluation and REFIT Review, two public consultations 12 were carried out in addition to other forms of consultation (consumer surveys, stakeholder interviews and surveys, targeted questionnaires sent to national authorities, 13 bilateral meetings, workshops, Member State dedicated expert group meetings, consultation of the Financial Services User Group, as well as ad hoc discussions during the annual Consumer Summits).

The European Parliament also organised a hearing in March 2021 on the Directive’s review, and the European Economic and Social Committee published an Information Report in 2019 on the evaluation of the Consumer Credit Directive 14 .

A group of Consumer Protection Cooperation (CPC) authorities (members of the CPC network) also did a coordinated compliance check of online advertising and offers to purchase consumer credit products in February/March 2021 15 .

The extensive consultation process has made it possible to identify the main stakeholder views on key issues. Stakeholders’ feedback identified the digitalisation of the market as the main driver to be considered in the review process. Consumer organisations favour an extensive revision of the Directive, to tackle several problems identified in the review linked to the inadequate scope of application of the Directive, irresponsible lending practices, information overload, data use and over-indebtedness, in particular in the COVID-19 context. Respondents across all stakeholder groups and Member States agree that the information consumers get at the advertisement and pre-contractual stages needs to be streamlined and reflect the growing use of digital devices, if it is to achieve its objective of protecting the consumer. Business representatives are very much in favour of regulatory stability and non-regulatory interventions, or targeted changes to the Directive to adapt it to digitalisation developments. They propose simplifying information disclosure requirements, while keeping enough flexibility in the creditworthiness assessment process. National authorities generally support a legislative amendment. Several Member States seem to favour extensive legislative changes to address the problems identified, whereas others advocate for a more targeted approach. A majority of national authorities recognise that harmonising rules would support the development of the cross-border market. All stakeholders appreciate the benefits of debt advisory services for vulnerable consumers and creditors, since these services enable creditors to recover debts effectively.

The input received was summarised and used to prepare the impact assessment accompanying this proposal, as well as to assess the impact of new rules on stakeholders.

• Collection and use of expertise

The Commission also drew on a series of studies and reports on issues relating to responsible lending and borrowing. These include the ICF study supporting the Directive’s Impact Assessment (2021) 16 ; the ICF study supporting the evaluation of the Consumer Credit Directive (2020) 17 ; the LE Europe et al. behavioural study on the digitalisation of the marketing and distance selling of retail financial services (2019) 18 ; the CIVIC study on measuring consumer detriment in the European Union (2017) 19 ; and the CIVIC study on the over-indebtedness of European households (2013) 20 .

The Commission also did a mapping of national approaches to creditworthiness assessment pursuant to the Consumer Credit Directive in the context of the 2017 Consumer Financial Services Action Plan 21 , in cooperation with Member State authorities, and published it in 2018 22 .

• Impact assessment

The Commission has done an impact assessment for this proposal.

The general goals of the REFIT Review were to reduce consumer detriment and the risks of taking out loans in a changing market, facilitate the cross-border provision of consumer credit and boost the competitiveness of the internal market. All this is in line with the original objectives of the Directive.

The options assessed to achieve the objectives were: a no-policy-change scenario (Option 0 - baseline), non-regulatory intervention (Option 1); a targeted amendment of the Directive, focusing on making its current provisions clearer and more effective (Option 2); an extensive amendment of the Directive to include new provisions in line with existing EU law (Option 3a) or to include new provisions going beyond existing EU law (Option 3b). Based on the impact assessment, the preferred option was identified as Option 3a, complemented by certain cost-effective measures taken from other options.

The preferred option consists of an amendment of the Directive to include new provisions, in line with existing EU acquis. By way of a brief summary of the main elements of the preferred option, the following measures have been included: extension of scope of the Directive to cover loans below EUR 200, interest free credit, all overdraft facilities and all leasing agreements, as well as credit agreements concluded through peer-to-peer lending platforms; amendment of definition of several key terms; provision of adequate explanations to consumers; reduction of the amount of information to be provided to consumers in advertising focusing on key information when provided through certain channels; more details on how and when pre-contractual information is presented to consumers to make sure it is done in a more effective way; ban of pre-ticked boxes; prohibition of tying practices; standards on advisory services; prohibition of unsolicited sale of credit products; establishment of the obligation upon Member States to set caps on interest rates, the annual percentage rate of charge or the total cost of the credit; establishment of conduct of business rules and obligation upon credit providers and credit intermediaries to ensure that staff members have the proper set of skills and knowledge; indication that creditworthiness assessments should be carried out based on information on financial and economic circumstances, necessary, sufficient and proportionate; provision on the use of alternative sources of data to conduct creditworthiness assessments reflecting the principles of the General Data Protection Regulation (EU) 2016/679; obligation on Member States to promote financial education; obligation upon Member States to adopt measures to encourage creditors to exercise reasonable forbearance; enhancement of the availability of debt advisory services; improving conditions for enforcement by introducing an article on competent authorities; 4 % rule (minimum maximum fine) as set in the Omnibus Directive (EU) 2019/2161 for cross-border widespread infringements is included with regards to penalties.

The preferred option was assessed as very effective in achieving the initiative’s objectives, ensuring a high level of coherence with EU legislation and efficiency in terms of the economic and social impacts assessed. It is expected to have a positive impact on consumer protection, reduce detriment, build trust and improve social inclusion. It is likely to strengthen the level playing field within and across Member States, by reducing the fragmentation of the current legal framework. The quantified measures under the preferred option would entail a reduction in consumer detriment of around EUR 2 billion in the period 2021-2030. In addition to these quantified measures, this option would entail the benefits of other measures such as caps on the annual percentage rate of charge/interest rates which are deemed to be very beneficial for consumers and for society, but could not be quantified, make the preferred option all the more viable. The impact on society is also deemed very positive, thanks to measures preventing and addressing over-indebtedness, thereby improving social inclusion. These measures include strengthening creditworthiness assessments, forbearance measures and debt advisory services. Per EUR 1 spent on debt advice, this is expected to provide between EUR 1.4-5.3 in equivalent benefits, mainly by way of the social costs of over-indebtedness being avoided.

Credit providers would bear most of the implementation costs of the new Directive. Some measures would be more costly for providers currently offering products not covered by the Directive (e.g. caps on interest rate, the annual percentage rate of charge or the total cost of the credit). The cost of the quantified measures for banks is estimated to be between EUR 1.4 billion and 1.5 billion. It is expected that costs are going to be passed on to consumers (even though it was not possible to ascertain to what extent).

The protection of consumers granting credit through peer-to-peer lending platforms is not addressed as it does not fit the logic of the proposal. Therefore, the protection of consumers investing through these platforms, and the responsibilities of the platforms towards these consumers will be assessed in another context and, if appropriate, followed up by a legal proposal.

• Regulatory fitness and simplification

The REFIT Review is included in the Commission Work Programme’s REFIT section. The proposal would entail costs for businesses, but is also expected to reduce their administrative burden, thanks to greater legal clarity. Several measures are already being implemented in some Member States, so businesses in those Member States would not face significant additional costs.

The proposal simplifies certain information requirements and aims at adapting requirements to digital use. Specifically, the proposal will reduce the advertising costs for credit providers/intermediaries on certain media, e.g. radio, while ensuring that consumers get clearer information that is easier to process and understand. The potential for simplification of requirements for advertising consumer credit on radio broadcasts can be estimated at EUR 1.4 million a year, amounting to 14 million over the period 2021-2030.

Adapting information requirements for digital use notably through a new Standard European Consumer Credit Overview has an initial cost. However, in the long run it would reduce the burden on businesses, which could provide the full Standard European Consumer Credit Information form by email, without needing to adapt it to digital screens. Since around one third of consumers entered a credit agreement online, this burden reduction could ultimately have a positive impact over 25 million personal bank loans annually.

As regards reduced burden for public administrations, the higher degree of legal clarity and the simplified regulatory framework is expected to reduce the number of complaints and increase the level of certainty and compliance, making enforcement procedures more efficient. Specific measures to reinforce coordination and improve conditions for enforcing the Directive are also expected to result in efficiency gains in the enforcement of the Directive’s obligations.

Specific impacts on SMEs have not been identified as significant, so they have not been assessed separately.

• Fundamental rights

This proposal respects fundamental rights and observes the principles recognised in particular in the Charter of Fundamental Rights of the European Union. In particular, it seeks to ensure full respect for the rules on the protection of personal data, the right to property, non-discrimination, the protection of family and professional life, and consumer protection pursuant to the Charter of Fundamental Rights of the European Union. Any processing of personal data for the purpose of this Directive will comply with Regulation (EU) 2016/679. This includes that only those data that are adequate, relevant and limited to what is necessary to assess consumer’s creditworthiness should be collected and otherwise processed.

It will prohibit discrimination based on nationality or place of residence, or any ground referred to in Article 21 of the Charter of Fundamental Rights of the European Union when requesting, concluding or holding a credit agreement within the EU, for the benefit of both creditors and consumers.

4. BUDGETARY IMPLICATIONS

This proposal has no implications for the budget of the EU or EU agencies, leaving aside the normal administrative costs linked to ensuring compliance with EU legislation, since no new committees are created and no financial commitments are made.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

The Commission will monitor the implementation of the revised Directive, if it is adopted, after its entry into force. The Commission will mainly be in charge of monitoring the Directive’s impact, based on the data provided by Member States authorities and credit providers, which will be based on existing data sources where possible to avoid additional burdens on the different stakeholders.

• Detailed explanation of the specific provisions of the proposal

The following summary aims to facilitate the decision-making process by outlining the main substance of the Directive. Article 1 (subject matter) states that the Directive aims to harmonise aspects of the laws, regulations and administrative provisions of the Member States concerning certain credit agreements for consumers and crowdfunding credit services.

Article 2 (scope) sets out the scope of the Directive, which covers certain credit agreements for consumers and crowdfunding credit services. Some exemptions permitted by Article 2 of Directive 2008/48/EC remain valid, but those concerning minimum amounts, leasing agreements with an option to purchase goods or services, overdraft facilities, free interest rate credit without charges or credit to be repaid within 3 months with only insignificant charges are removed.

Article 3 (definitions) defines the terms used in this proposal. To the greatest extent possible, definitions have been aligned with those in other EU texts, in particular Directive 2014/17/EC on credit agreements for consumers relating to residential immovable property. However, given the specificities of this Directive, some have been tailored to this proposal’s needs.

Article 4 (conversion of amounts expressed in euro into national currency) sets out rules for converting the amounts expressed in euro in the Directive into national currency.

Article 5 (obligation to provide information free of charge to consumers) includes an obligation to give consumers information free of charge in accordance with the Directive.

Article 6 (non-discrimination) requires Member States to ensure that consumers legally resident in the Union are not discriminated against on ground of their nationality, residence or on any ground as referred to in Article 21 of the Charter when requesting, concluding or holding a credit agreement or crowdfunding credit services in the EU.

Article 7 (advertising and marketing of credit agreements and crowdfunding credit services) introduces general principles for marketing and advertising communications.

Article 8 (standard information to be included in advertising of credit agreements and crowdfunding credit services) sets out the form and content of information to be included in advertising. The standard information concerns key credit features. In specific and justified cases where the medium used to communicate the information to be included in advertising does not enable its visual display, such as in radio advertising, such information should be reduced to avoid information overload and reduce unnecessary burden. These provisions complement the obligations of Directive 2002/65/EC concerning the distance marketing of consumer financial services and Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market.

Article 9 (general information) requires that clear and comprehensible general information about credit agreements is made available by creditors or, where applicable, by credit intermediaries or providers of crowdfunding credit services at all times.

Article 10 (pre-contractual information) creates an obligation for creditors, credit intermediaries or providers of crowdfunding credit services to give consumers personalised pre-contractual information on the basis of the Standard European Consumer Credit information form, in addition to which they are to get a Standardised European Consumer Credit Overview one-pager outlining the key features of the credit in question, to help them compare different offers. The purpose is to ensure that consumers see all the essential information at a glance, even on a mobile telephone screen. The content and layout of the Standardised European Consumer Credit Overview is detailed in Annex II, while the content and layout of the Standard European Consumer Credit Information form is detailed in Annex I. Pre-contractual information must be provided at least 1 day before the consumer is bound by any credit agreement, or agreement for the provision of crowdfunding credit servicesor offer. If pre-contractual information is provided less than one day before the consumer is bound by any credit agreement, agreement for the provision of crowdfunding credit services or offer, creditors, credit intermediaries or providers of crowdfunding credit services must remind consumers, one day after the contract is concluded, of the possibility of withdrawing from the credit agreement or from the agreement for the provision of crowdfunding credit services.

Article 11 (pre-contractual information with regard to credit agreements referred to in Article 2(5) or (6)) creates an obligation for creditors and credit intermediaries to give consumers personalised pre-contractual information for certain types of consumer credit on the basis of the European Consumer Credit Information form, in addition to the Standard European Consumer Credit Overview one-pager. The content and layout of the form is detailed in Annex III. For other credit agreements, pre-contractual information must be provided at least 1 day before the consumer is bound by any credit agreement or offer, otherwise creditors and credit intermediaries must remind consumers, one day after the contract is concluded, of the possibility of withdrawing from the credit agreement.

Article 12 (adequate explanations) requires creditors, credit intermediaries or provider of crowdfunding credit services to adequately explain to consumers the proposed credit agreements, crowdfunding credit service and ancillary services, in order to enable them to assess whether they are adapted to their needs and financial situation.

Article 13 (personalised offers on the basis of automated processing) makes it obligatory to inform consumers when, on the basis of automated processing, including profiling, they are presented with personalised offers.

Article 14 (tying and bundling practices) prohibits tying practices, unless it can be demonstrated that they result in a clear benefit for consumers taking due account of the availability and prices of the kinds of products in question, while allowing bundling practices.

Article 15 (inferred agreement for the purchase of ancillary services) prohibits inferring consumer agreement through default options such as pre-ticked boxes.

Article 16 (advisory services) establishes standards to ensure that, where advice is given by the creditor, the credit intermediary or the provider of crowdfunding credit services, consumers are made aware of this, without introducing any obligation to provide advice. It introduces a requirement that a sufficient number of credit agreements or crowdfunding credit services on the market be considered and that advice be given in line with the profile of the borrower.

Article 17 (ban on unsolicited credit sales) prohibits any unsolicited sale of credit, including non-requested pre-approved credit cards sent to consumers or consumers’ overdraft/credit card spending limit being raised unilaterally by the creditor, without their prior request or explicit agreement.

Article 18 (obligation to assess the creditworthiness of the consumer) requires the creditor or the provider of crowdfunding credit services to assess the consumer’s ability to repay the credit, taking into account the consumer’s interest and based on necessary and proportionate information on the consumer’s income and expenses and other financial and economic circumstances, without exceeding what is strictly needed to perform such an assessment. It also requires that credit is made available to consumers where the result of the creditworthiness assessment indicates that the obligations resulting from the credit agreement or from the agreement for the provision of crowdfunding credit services are likely to be met in the manner required under that agreement unless in specific and justified circumstances. In addition, when the creditworthiness assessments is based on automated processing, including profiling, consumers have the right to request and obtain human intervention on the part of the creditor, a meaningful explanation of the assessment of creditworthiness, and express his or her point of view and to contest this creditworthiness assessment.

Article 19 (databases) introduces provisions to ensure that creditors or providers of crowdfunding credit services are able to access information from relevant databases on a non-discriminatory basis.

Article 20 (form of the credit agreement and of the agreement for the provision of crowdfunding credit services) and Article 21 (information to be included in the credit agreement or in the agreement for the provision of crowdfunding credit services) set out the form and the information to be included in credit agreements or agreements for the provision of crowdfunding credit services.

Article 22 (information regarding the modification of the credit agreement or of the agreement for the provision of crowdfunding credit services) sets out specific safeguards to be put in place for consumers in case of modification of credit agreements or agreements for the provision of crowdfunding credit services.

Article 23 (changes in the borrowing rate) sets out the information to be given to the consumer if the borrowing rate changes.

Article 24 (overdraft facilities) introduces provisions to ensure that consumers are kept regularly informed of certain particulars of their overdraft facility.

Article 25 (overrunning) sets out rules on tacitly accepted overdrafts whereby a creditor makes available to a consumer funds that exceed the current balance in the consumer's current account or the agreed overdraft facility. In the event of a significant overrunning, the consumer must be alerted and informed of the conditions that apply.

Article 26 (right of withdrawal) proposes the option for consumers of withdrawing from a credit agreement or an agreement for the provision of crowdfunding credit services under circumstances similar to those referred to in Directive 2002/65/EC on the distance marketing of consumer financial services.

Article 27 (linked credit agreements) sets out specific rules on linked credit agreements and consumers’ right of withdrawal.

Article 28 (open-end credit agreements or agreements for the provision of crowdfunding credit services) sets out specific conditions to terminate open-end agreements.

Article 29 (early repayment) sets out the right for consumers to discharge their obligations before the due date. In the case of full or partial early repayment, the consumer is entitled to a reduction in the total cost of the credit, while the creditor is entitled to a fair and objectively justified compensation for possible costs directly linked to early repayment of the credit.

Article 30 (calculation of the annual percentage rate of charge) concerns the main indicator used to compare consumer credit products. It requires, for consumer credit products, the use of the definition of the annual percentage rate of charge (APR) used in Directive 2008/48/EC. Details of the APR calculation method are given in Annex IV and provisions for amending the methodology are laid down in order to be able to take market developments into account.

Article 31 (caps on interest rates, annual percentage rate of charge and the total cost of the credit to the consumer) introduces caps to be placed on the interest rate applicable to consumer credit agreements, on the APR and/or on the total cost of the credit. Member States may decide to set up a specific cap for a revolving credit facility.

Articles 32 (conduct of business obligations when providing credit to consumers) and 33 (knowledge and competence requirements for staff) stipulate important conditions for creditors, credit intermediaries and providers of crowdfunding credit services in order to ensure a high degree of professionalism in the provision of consumer credit, such as requirements for remuneration policies and requirements to have the appropriate knowledge and skills.

Article 34 (financial education) introduces financial education measures to be promoted by Member States, in particular in relation to consumer credit agreements, to improve consumers’ financial literacy, including on products sold digitally.

Article 35 (arrears and forbearance measures) introduces measures to encourage reasonable forbearance before enforcement proceedings are initiated.

Article 36 (debt advisory services) requires Member States to ensure debt advisory services are made available to consumers.

Article 37 (admission, registration and supervision of non-credit institutions) stipulates that non-credit institutions must be subject to adequate admission processes, registration and supervision. This should ensure that all creditors and providers of crowdfunding credit services, whether a credit institution or not, are adequately regulated and supervised.

Article 38 (specific obligations for credit intermediaries) contains provisions for special measures in relation to credit intermediaries.

Article 39 (assignment of rights), corresponding to Article 17 of Directive 2008/48/EC, states that certain rights are to be maintained in the event of the assignment to a third party of the creditor’s rights under a credit agreement, or the assignment to a third party of the credit agreement itself. An assignee is understood as any person to whom the creditor's rights have been assigned, in other words a credit insurer, debt collection agency, a rediscounting company or securitisation company etc.

Article 40 (out-of-court dispute resolution), provides that consumers should have access to alternative dispute resolution procedures for the settlement of disputes between consumers and creditors, credit intermediaries or crowdfunding services providers concerning rights and obligations established by this Directive, without distinguishing between contractual and pre-contractual disputes. Such alternative dispute resolution procedures and the entities offering them should comply with the quality requirements established by Directive 2013/11/EU..

Article 41 (competent authorities) requires Member States to designate specific competent authorities to implement the Directive.

Article 42 (level of harmonisation) and Article 43 (imperative nature of the Directive) confirm the principle of full harmonisation as well as the imperative nature of the Directive. Member States shall not be entitled to have in place other provisions in relation to the areas covered by the Directive insofar as it contains harmonised provisions in those areas.

Article 44 (penalties) requires Member States to ensure that appropriate administrative measures or sanctions be applied in the case of non-compliance with the Directive. In addition, for ‘widespread infringements’ and ‘widespread infringements with an EU dimension’, as defined in the revised CPC Regulation, Member States will be required to put in their national law fines of a maximum amount of at least 4% of the infringing creditor, credit intermediary or provider of crowdfunding credit services’s turnover in the Member States concerned.

Article 45 (exercise of delegation) sets out the procedures to be followed to allow certain parts of the Directive to be adapted, specified or updated by means of delegated acts.

Articles 46 (review and monitoring), 47 (repeal and transitional provisions), 48 (transposition), 49 (entry into force) and 50 (addressees) contain standard provisions and wording that require no special comment.