Directive ‘will benefit borrowers’

New consumer credit rules will provide borrowers with greater information and more rights, it has been claimed.

Such features are among the elements of the new European Consumer Credit Directive and head of consumer finance at the Finance and Leasing Association (FLA) Fiona Hoyle said yesterday (February 1st): “The Consumer Credit Directive means that consumers will receive much more information when they are looking for a new loan, credit card or in-store credit deal.”

With the new regime in place, it means those looking to take out loans and people keen to avoid getting into too much debt should now be in a better position, the FLA suggested.

It noted the extra information given includes a pre-contract form giving details of rates and how credit scoring works, which applicants can see before they proceed with a credit check.

And when the check has been done, those who are successful will now be allowed a 14-day cooling-off period in which they have the chance to reconsider their borrowing and cancel it if they wish.

There will also be more information about products in general and a key change will be the removal of early repayment penalties, which may particularly benefit people who see another loan at a better rate and can use that to pay off an existing one without being stung for an extra amount.

According to Justin Codray of financial website Candid Money, the best way to judge the value of a loan is through the final amount to be paid back over the term, not the monthly repayments.

By James Francis