Memorandum by the Consumer Law Sub-Committee
of the Law Society of Scotland
The Consumer Law Sub-Committee ("the Committee")
of the Law Society of Scotland has had the opportunity of considering
the consultation on a Proposed European Consumer Credit Directive
issued by the Department of Trade and Industry. Our comments are
made bearing in mind the position stated within paragraph 27 of
section B, on page 14, that specific views on the draft are not
invited. In addition, a number of questions relate to industry
issues on which it would not be appropriate to comment. The Sub-Committee's
comments are, therefore, of a general nature.
CHAPTER 1: AIM,
DEFINITIONS AND
SCOPE
Q1: Do you have any concerns arising from
any of the other definitions in this Article?
The Sub-Committee agrees with the DTI's concern
over the definition of "credit intermediaries".
Q2: What do you think is the appropriate
level of harmonisation for the Directive? Why?
The Directive should seek to achieve a sufficient
degree of harmonisation to enhance cross/border trade and promote
uniform consumer protection measures. The Sub-Committee agrees
with the DTI's approach that there should be tempered harmonisation
and not maximum harmonisation.
Q3: If you support a targeted harmonisation
approach which areas do you think should be subject to maximum
harmonisation, which minimum?
The Sub-Committee agrees with the DTI's approach
at paragraph 44. The areas of maximum harmonisation should include:
data access, information, APR.
Q4: Do you agree with the proposed UK Government
position with regard to the various scope and specific requirement
issues—if not, what would you amend and why?
The Sub-Committee agrees with the DTI's approach.
In particular, we share their concern in relation to hire purchase
and leasing agreements. The Society agrees that the UK should
support the Commission's effort to create a single market, but
that it should not support moves which will reduce level of protection
to consumers.
CHAPTER 2: INFORMATION
AND PRACTICES
PRELIMINARY TO
THE FORMATION
OF THE
AGREEMENT
Q5: Will the article, as drafted, assist
the development of a cross-border market and consumer protection
for credit by making credit advertisements more transparent?
The Sub-Committee agrees that the approach taken
within the Directive could be unduly restrictive, particularly
in relation to advertisers of credit products who are merely seeking
to increase brand awareness rather than advertise or sell specific
products.
Q6: Do you think that a principled approach
based on mutual recognition would be appropriate for advertising?
If so, what key information do you think should be included in
all credit advertising?
Where the advertisement goes beyond a mere "brand
awareness" advertisement the APR or total charge for credit
should be included as should the amount of loan, the total cost
of interest and the repayment terms.
Q7: Do you agree with the UK position on
contractual information?
The Society agrees with paragraphs 84-88 and
the UK's concerns about "responsible lending" being
unclearly defined.
Q8: Do you agree with the position on pre-contractual
information and in particular the reference to "in good time"?
The Society agrees with the phrase "good
time" for reasons stated. This could be set as a specified
time period. The Society also agrees with less onerous requirements
for telephone conversations (paragraph 93) so long as there is
a duty to advise in writing consequently.
Q9: Do you agree with our position on a duty
to advise?
The Society agrees with paragraph 98 and the
implications for using account credit cards. The Society also
agrees that there is an inherent difficulty in creating a duty
to advise, which conflicts with seller's interest. The duty to
advise may also make the application process longer. This may
limit credit purchase to face-to-face agreements. This would reduce
choice.
Q10: Do the extra requirements of the Article
cause lenders and borrowers any difficulties?
The Consumer Credit Act 1974 ("the CCA")
does not require the APR to be provided in respect of overdrafts.
Overdrafts are partially exempt from the CCA. Extra requirements
could, in practice, cause difficulties.
Q11: Do you agree with the UK approach to
Credit Unions?
Yes, agreed.
Q12: Do you have any comments on how the
proposal contained in Article 7 can be amended so that the consumer
clearly benefits and is not exposed to exploitation?
The Society agrees with paragraphs 113-114,
that the reference to legal proceedings should be tightened and
that this article refers to only the original lender. This is
an area where the creditor should be required to advise the consumer
according to his or her best interests.
CHAPTER 3: DATABASE
ACCESS
Q13: Do you agree with the UK position on
Databases?
No comment.
Q14: We would like to know of any concerns
you may have arising out of this Article, including any concerns
about the costs of implementation.
No comment.
CHAPTER 4: FORMATION
AND SURETY
AGREEMENTS
Q15: Would lenders have systems difficulties
in providing the personalised information currently required by
the draft Directive?
This is an issue on which lenders are best placed
to comment.
Q16: Please provide any specific comments
you might have on these extra items of information that the Directive
proposes should be included in credit agreements.
The Society agrees with paragraph 129 that there
are difficulties with the high level of UCT legislation. If this
is included, information on excluding liabilities under UCTA would
be appropriate.
Q17: Do you agree that the UK should argue
for the inclusion of all of the above information requirements
in the Directive?
Yes, the Society agrees that this should be
argued.
Q18: Do you agree with the UK position on
right of withdrawal?
A right of withdrawal can be a substantive and
meaningful measure of consumer protection. It does, however, require
to be carefully weighed against the lender's requirement to achieve
certainty.
CHAPTER 5: ANNUAL
PERCENTAGE RATE
OF CHARGE
AND BORROWING
RATE
Q19: Do you agree with our policy to seek
maximum harmonisation on the subject of APR on the basis of the
policy suggestions outlined?
Yes.
Q20: Given that we aim to retain the current
provisions relating to the calculation of APRs for HP transactions,
are there any difficulties associated with this proposal and if
so what are they?
The Society is unaware of any difficulties associated
with this proposal.
Q21: Do you agree with our policy to resist
the requirement that the new APR and amortisation table must be
given when borrowing rates are varied?
Agreed.
CHAPTER 6: UNFAIR
TERMS
Q22: Do you support the inclusion of these
terms in the Unfair Contract Terms legislation? If so, why?
Agreed.
CHAPTER 7: PERFORMANCE
OF A
CREDIT AGREEMENT
Q23: Would you prefer to see maximum or minimum
harmonisation in this area? Why?
The Sub-Committee agrees with the DTI's position
on the retention of rights.
Q24: Do you agree with our position on assignments
of rights?
Agreed.
Q25: Do you support our policy to maintain
current UK law and retain the provisions contained in the 1987
Directive?
Agreed.
Q26: Would you support our approach of maintaining
joint and several liability as set out in the UK?
Agreed.
Q27: Do you agree with a minimum harmonisation
approach in this area?
No comment.
CHAPTER 8: SPECIFIC
CREDIT AGREEMENTS
Q28: Is there any need for this Article?
If so, in what circumstances should it be retained?
This may be a matter for national variation.
CHAPTER 9: PERFORMANCE
OF A
SURETY AGREEMENT
Q29: In view of the differences between the
Article and UK law do you agree we should seek minimum harmonisation?
Minimum harmonisation would be an advantage.
CHAPTER 10: NON-PERFORMANCE
OF A
CREDIT AGREEMENT
Q30: Are there any problems with applying
this requirement to running account credit?
No comment.
Q31: Do you agree that a minimum harmonisation
approach to default and enforceability is appropriate?
Agreed.
Q32: Do you think that this Article provides
adequate regulation for unauthorised overdrafts?
Agreed.
CHAPTER 11: REGISTRATION,
STATUS AND
CONTROL OF
CREDITORS AND
CREDIT INTERMEDIARIES
Q33: Do you think that this Article is strong
enough to protect consumers in an open internal market? Or do
you think that such light requirements will upset the balance
of competition and level of consumer protection?
No comment.
Q34: Would it be more appropriate to introduce
a passporting system similar to the banking Directives, where
creditors or intermediaries would have to fulfil passporting provisions
demonstrating that they are "fit" before they lend cross-border?
No comment.
Q35: Is there any reason why credit intermediaries
should not be required to divulge whether they are an independent
broker, or work with one or more clients?
No comment.
Q36: Would you agree that the instances when
a credit intermediary can charge a fee should be limited? If so,
do you agree with the conditions above?
No comment.
SECTION C: REGULATORY
IMPACT ASSESSMENT
Q37: Do you agree with the assumptions, figures
and impact assessments made in this RIA—if not, please provide
as much supporting evidence as possible.
No comment.
June 2005
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