ERU, Alm.del - 2018-19 (1. samling) - Bilag 207: Regeringens høringssvar til Europa Kommissionens høring vedrørende forbrugerkreditdirektivet, fra erhvervsministeren

Erhvervs-, Vækst- og Eksportudvalget 2018-19 (1. samling)
ERU Alm.del Bilag 207
Offentligt

NOTE

27. marts 2019

19/01341-6

CKJ/SDJ-KFST

Response by the Danish government to the public consultation for

the Evaluation of the Consumer Credit Directive

General remarks

The Danish government welcomes and supports the evaluation of the

Consumer Credit Directive (CCD). In general, Denmark supports the

Better Regulation and REFIT agenda. It is important to have an ongoing

focus on ensuring effective consumer protection as well as reaping the

potential benefits of the regulation in EU.

We welcome the thorough scrutiny of the CCD.. We further believe this

would support the Commission’s

intentions towards Better Regulation as

described in the Principles on Better Regulation.

The following remarks encompass the Danish position on the questions

asked in the public consultation of the CCD.



Reducing burdens and activating consumers

It is important that the CCD strikes a reasonable balance between the

interest of consumers and the creditors. The fundamental rights for the

consumers should be ensured while creditors should not be imposed un-

necessary burdens.

The development in behavioral insights has demonstrated that the mas-

sive amount of information provided to the consumer might be counter-

productive. Many studies confirm that a large amount of information may

overwhelm and frustrate consumers, causing them simply to skip reading

the information. This is in contrast to the intentions behind the pre-

contractual information requirements. Modern consumer legislation

should pay attention to the development of behavioural insights and min-

imize burdens on companies, e.g. by giving the consumer essential in-

formation, presented in a simple manner. Furthermore, the information

must be presented at the right time during the purchase making it useful

for the consumer to compare credits and make the right choice.

The Danish government acknowledges and welcomes the Commission’s

existing work on behavioral insights and recommends additional testing

of the information requirements in the CCD on consumer behavior.



Digitalization

ERU, Alm.del - 2018-19 (1. samling) - Bilag 207: Regeringens høringssvar til Europa Kommissionens høring vedrørende forbrugerkreditdirektivet, fra erhvervsministeren

The environment in which consumers act has changed because of digiti-

zation and new technologies. New business models challenge the tradi-

tional concept of creditors and consumers.. The CCD is based on earlier

generation technology and this causes friction for both creditors and con-

sumers. Technology is playing an increasingly important role in the inter-

action between creditors and consumers and consumers often search for

credits online. Therefore, it is important that the CCD reflects this and

supports new digital solutions that empower the consumers to compare

credits and prices from different providers.

Moreover, the access to big data and the ability to apply big data when

profiling consumers has changed and improved the methods used by the

creditors to assess their customers, but the need to know the customer

remains in our opinion unchanged. The future regulation must ensure that

the application of new technologies and the use of data are regulated ap-

propriately and balanced for the benefit of the market, meaning both con-

sumers and creditors.



Information requirements

Creditors are obliged to comply with a large number of information re-

quirements in advertisements, pre-contractual phase and in the credit

agreement. This can be burdensome to both the creditors and the con-

sumers, who are expected to read and understand extensive contractual

information in a purchase situation. There is a need to evaluate all infor-

mation requirements in the CCD in order to ensure that consumers are

provided with essential and beneficial information, presented in a simple

manner and at the right time in the purchase situation.

The Danish government urges the Commission to look at the information

requirements in the CCD with the use of behavioral insights in order to

present the relevant information at the right time and in the right context

for the consumers and thereby ensure effectiveness of the information

requirements. In this regards, focus on digitalization is essential in order

to ensure that creditors can provide information, e.g. pre-contractual in-

formation, to consumers in a sensible way that fits different devices and

media.

Issues related to information requirements are similar in other areas of

consumer regulation. Therefore, any amendments in the CCD should be

streamlined in other regulations to the furthest extent possible where rel-

evant, e.g. in the Distance Marketing of Financial Services Directive and

the Mortgage Credit Directive. This, in order to remove unnecessary bur-

dens and to ensure greater coherence in the regulation.

Specific remarks

ERU, Alm.del - 2018-19 (1. samling) - Bilag 207: Regeringens høringssvar til Europa Kommissionens høring vedrørende forbrugerkreditdirektivet, fra erhvervsministeren



Cross-border activity

The aim of the CCD is to encourage and generate cross-border demand

from the consumers as well as cross-border supply and competition

among creditors. The lack of knowledge of credits in other Member

States, the language barriers, the legal barriers, the lack of transparent

complaint schemes may be some of the reasons that make consumers

hesitate to demand cross-border financial services.

On the providers’ side, the lack of data, legal uncertainty and language

barriers inhibit cross-border activities. The Danish government also sus-

pects that EU-regulation is implemented differently in Member States

causing legal uncertainty and in practice creates double regimes.



The scope of the CCD

The CCD does not apply to credit agreements involving a total amount of

credit less than EUR 200 or more than EUR 75.000. Because of the

threshold on EUR 200, it has been necessary to introduce national legisla-

tion in order to secure consumer protection especially on “payday loans”.

The Danish government finds that the CCD should apply to all credits

less than EUR 200 in order to ensure that creditors always are obliged to

assess the consumer’s creditworthiness and thereby only offer these types

of credits to consumers that in reality cannot afford it.

The Danish stakeholders argue that all creditors no matter the amount of

the credit should be within the scope of the CCD.



Standard information to be included in advertising

The purpose of the standard information in advertising is to ensure that

consumers understand the different financial characteristics of the credit

in their initial comparis of credit from different providers. Given the re-

cent insights from behavioral studies that have shown that extensive in-

formation requirements are not always beneficial for consumers and the

fact the format of digital advertisement channels has restrictions in space,

it is relevant to consider if a reduction of information is beneficial for

consumers.

In 2018 the Danish Competition and Consumer Authority has conducted

a behavioral study to investigate how a simplification of the information

requirements in advertisement of consumer credits affects consumers.

The study was only concerned with advertisement of consumer credits,

not information requirements at contractual levels.

In summary, the study found that consumers benefit from a simplification

of the information requirements for consumer credit marketing material:

ERU, Alm.del - 2018-19 (1. samling) - Bilag 207: Regeringens høringssvar til Europa Kommissionens høring vedrørende forbrugerkreditdirektivet, fra erhvervsministeren



Consumers’ ability to remember financial information is significantly

enhanced with a simplified disclosure in TV media.

The ability to recall information depends on the run time of the adver-

tisement.

Increasing the visual saliency of financial information has a positive

effect on consumers’ ability to recall important information.

Consumers were to a large extent able to identify the better of two

offers in a scenario with current as well as simplified disclosure. Yet,

the simplified disclosure significantly reduced decision time and ef-

fort needed to complete the choice task.

The choice experiment indicates that consumers use the annual per-

centage rate (APR) when choosing installment plans, but fail to rec-

ognize that in cases of purchase on credit, where creditors specify a

higher price for the product and appear with a lower APR, it may be a

misleading comparison parameter.

The perceived attractiveness of personal loan offers was not affected

by the simplified disclosure.



On that basis, the Danish government suggest that the information re-

quirements in Article 4, regarding standard information to be included in

advertising, should be simplified.

Reduction of the key information presented in advertising will make the

initial comparison of credits across providers easier for consumers. This

will also improve the competition between creditors.

The Danish government encourages the Commission to look further at

how the information can be structured and presented in the light of the

digitalization and use of different media for advertising.

The Danish stakeholders argue that it is important to consider how the

information is provided and how the consumers understand the infor-

mation - with the use of behavioral insight. The existing information re-

quirements are too comprehensive, which causes consumers often not to

read and understand the information provided. In addition, the require-

ments do not take into account the media used in the marketing. On these

grounds, creditors often choose to advertise without indicating any fig-

ures in order to avoid complying with the information requirements in

Article 4.



Obligation to assess the creditworthiness of the consumer

Pursuant to Article 8 in CCD, the creditor has an obligation to assess the

consumer’s creditworthiness

based on

“sufficient information”.

ERU, Alm.del - 2018-19 (1. samling) - Bilag 207: Regeringens høringssvar til Europa Kommissionens høring vedrørende forbrugerkreditdirektivet, fra erhvervsministeren

However, the consumer credit directive does not contain any require-

ments for what “sufficient information” is.

The Danish Consumer Ombudsman has since the beginning of 2018 been

examining nine credit providers’ procedure in respect of the creditworthi-

ness assessment. Some of the issues the Danish Consumer Ombudsman

sees are the following:



Some of the credit providers have been assessing the consumers’ abil-

ity to pay the ongoing costs in respect of the loan, and not whether the

consumer is able to repay the credit amount

Some of the credit providers do not take the consumers existing debt

into account in their creditworthiness assessment of the consumer

Some of the credit providers do not base the creditworthiness assess-

ment on the consumer’s individual expenses but on statistical expens-



The Danish government suspects that this is not only a Danish issue. For

that reason, the Danish government finds that more specific criteria needs

to be laid down, and that all creditors should be obliged to assess ade-

quately the creditworthiness of the consumer. Identical requirements in

EU in this regard are essential in order to improve competition between

creditors (level playing field) and at the same time deterring European

consumers from credit agreements they cannot afford.

The Danish stakeholders argue that it is fundamental that the provisions

about creditworthiness assessment are at a high standard ensuring a com-

plete assessment. By comparison, the requirements to the creditworthi-

ness assessment is much higher in the Mortgage Credit Directive. Fur-

thermore, some Danish stakeholders argue that infringements should be

punished.



Standard European consumer credit information (Annex II)

The Standard European consumer credit information in annex II of the

CCD, intends to enable consumers to compare credits and prices. Never

the less, this tool is too complicated and detailed and some of the infor-

mation provided in the standardized information sheet are not relevant in

all Member States.

Furthermore, as mentioned above insights from behavioral studies have

shown that extensive information requirements are not always beneficial

for consumers and the fact the format of digital advertisement channels

has restrictions in space, it is relevant to consider if a reduction of infor-

mation is beneficial for consumers.

ERU, Alm.del - 2018-19 (1. samling) - Bilag 207: Regeringens høringssvar til Europa Kommissionens høring vedrørende forbrugerkreditdirektivet, fra erhvervsministeren

The Danish Banker Association argues that the standardized information

sheet has no benefits for neither creditors nor consumers. The sheet needs

to be simplified containing only key information that is relevant for the

consumers and makes it possible to compare credit offers from different

creditors. In addition, the digitalization entail that consumers often search

for credits online and therefore, the sheet is not applied as intended for.