MEPs to vote on opening up consumer credit market

EU:A long-running row over moves to allow EU citizens to obtain credit and shop around for loans in any member state, is likely to be resolved in Strasbourg today.

Two-thirds of Europeans use credit to buy items such as cars and household goods, in a market worth €800 billion annually.

The market is largely confined to national lenders and since 2002 the European Commission has been pressing for a consumer credit directive which would harmonise consumer credit contracts in areas such as early repayment, information on the full cost of a loan and the right to cancel.

Under commission proposals the legislation would cover loans from €200 to €75,000 including "SMS" or "quick loans", where consumers can borrow hundreds of euro within 15 minutes, simply by sending a text. Such loans are growing in popularity, especially in Sweden and Estonia.

At the larger end of the loan spectrum, the directive would allow people to choose the best offer available from banks or credit companies in another European country, based on a comparable and transparent system.

However, the proposal has been dogged by disagreement at the EU Council of Ministers, the parliament and some leading banks who opposed proposals to allow consumers to repay loans early without penalty.

But at the parliament yesterday there was general agreement that those who pay back back more than a year early should only face penalties amounting to less than 1 per cent of the outstanding loan, or 0.5 per cent if they were paying back within a year of the end of the loan. Whether the banks may appeal to a regulator in individual cases is to be left to the member states to decide.

The parliament will vote on the compromise today. It is predicted that if it is successful it will also be acceptable to the commission and the council of ministers. Dublin MEP Eoin Ryan has welcomed the deal.