Press Release

UK CREDIT INDUSTRY RAISES CONCERN OVER PROPOSED CONSUMER CREDIT DIRECTIVE

1 May 2007

Credit law proposals from Brussels mean consumers are likely to find it harder and less convenient to get credit, a new study reveals.  The study also suggests a damaging effect on the UK economy, with possible knock-on effects into other Member States.  An independent Oxera analysis, commissioned by a coalition of UK credit providers, shows that the draft EU Consumer Credit Directive would be likely to put upward pressure on the price of credit without improving benefits to consumers.

With the UK having the largest consumer credit market in Europe, the research was modelled on the UK economy. Key findings show that within two years of the implementation of the Directive:

·UK Consumer spending would fall by £1.4 billion (€2 billion);
·UK GDP would fall by £850 million (€1.2 billion); and
·Between 1 and 1.7 million UK consumers would be affected by a reduction in the amount of credit that lenders would be able to make available to them.

In a separate development, the UK credit industry also welcomes the European Parliament’s independent impact assessment published only a few days ago. The European Parliament study’s findings show that costs of lending would rise and the choices (range and variety of products) available to consumers would drop with the implementation of the Directive.

Angela Knight, Chief Executive of the British Bankers’ Association, said:
“These studies show that the Consumer Credit Directive as currently drafted is a costly piece of legislation to implement and could increase bureaucracy to the detriment of consumers and lenders. Working with other stakeholders, such as the European Commission, we are seeking some sensible changes to benefit both.”

Edward Simpson, Head of Public Affairs at the Finance & Leasing Association (FLA) stated that: “We have long called on the European Institutions to undertake an impact assessment in line with the Commission’s professed commitment to the better regulation agenda. We are therefore pleased that the European Parliament has undertaken analysis, which like the OXERA research shows that that a Directive in itself will not create an integrated consumer credit market.”

Sandra Quinn, Director of Communications at APACS said: “We welcome the Oxera study which supports our view that, as drafted, the CCD does not achieve its stated objectives and results in a significant adverse impact for consumers and the UK economy. One major flaw with the Directive is that it could restrict access to credit - an objective that it seeks to prevent."