Integration of the EU Consumer Credit Market: Proposal for a More Efficient Regulatory Model
Since the adoption of the current Consumer Credit Directive 87/102/EC in 1986, the EU consumer credit market has changed significantly in terms of size and structure. Although amendments were introduced in 1990 and 1999, the Directive no longer addresses the needs of the market. Cross-border lending in the EU has been estimated to be only 2 to 5% of total EU lending, partly owing to variations in the applicable legislation across member states. The reason for the persistent legal differences is that the current regulatory model is based on a minimum harmonisation approach (together with the rules of Art. 5 of the Rome Convention) and national regulators have different views about consumer protection.
To move towards greater consistency, the Commission sought to change the regulatory approach from minimum to total harmonisation in its proposed new Consumer Credit Directive. Yet this regulatory method presents several difficulties. The EU legislative process is too long and rigid for a fast-changing market. Further, member states do not wish to lose regulatory powers on issues that may need rapid adaptations to meet social or economic needs. This paper argues that one way forward is to draw from the experience of the strategies used to achieve integration of EU financial markets and adapt it to the field of consumer credit. A variation of the Lamfalussy approach, in which comitology procedures are used in the legislative process, would radically improve the regulatory process for consumer credit. By involving the member states to a greater extent and allowing for quick adaptations, such an approach would ultimately lead to a greater level of market integration.