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Impact Assessment Report

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Impact Assessment Report EUROPEAN COMMISSION Brussels, 30.6.2021 SWD(2021) 170 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on consumer credits {COM(2021) 347 final} - {SEC(2021) 281 final} - {SWD(2021) 171 final} EN EN DISCLAIMER: This is a working document draft which does not reflect the views of the European Commission. The positions expressed therein do not prejudge the official position of the European Commission EN EN Table of Contents 1. Introduction: political and legal context ...................................................................................... 3 2. Problem definition ....................................................................................................................... 6 2.1 What are the problem drivers? .................................................................................................. 8 2.2 What are the problems?............................................................................................................. 8 2.3 What are the consequences of the problems? .................................................................... 25 2.4 How will the problem evolve?........................................................................................... 26 2.5 Intervention logic ............................................................................................................... 29 3. Why should the EU act? ............................................................................................................ 30 3.1 Legal basis ......................................................................................................................... 30 3.2 Subsidiarity: Necessity of EU action ................................................................................. 30 3.3 Subsidiarity: Added value of EU action ............................................................................ 31 4. Objectives: What is to be achieved? .......................................................................................... 32 4.1 General objectives ............................................................................................................. 33 4.2 Specific objectives ............................................................................................................. 33 5. What are the available policy options? ...................................................................................... 34 5.1 What is the baseline from which options are assessed? .................................................... 34 5.2 Description of the policy options....................................................................................... 35 5.3 Options discarded at an early stage ................................................................................... 44 6. What are the impacts of the different policy options and who will be affected? ...................... 45 6.1 Policy option 1: Non-regulatory intervention .................................................................... 46 6.2 Policy option 2: Targeted amendment of the Directive to increase legal clarity .............. 47 6.3 Policy option 3a: Extensive amendment of the Directive to include certain new provisions, in line with existing EU acquis................................................................................... 49 6.4 Policy option 3b: Extensive amendment of the Directive to include provisions going beyond existing EU acquis ............................................................................................................ 52 7. How do the options compare? ................................................................................................... 54 7.1 Effectiveness: expected achievement of the initiative’s objectives ........................................ 54 7.2 Efficiency: impacts on businesses and consumers .................................................................. 55 7.3 Coherence with other EU legislation (and policy objectives)................................................. 59 7.4 Stakeholder views on the options............................................................................................ 59 7.5 Comparison of options and proportionality ............................................................................ 61 8. The preferred option .................................................................................................................. 63 8.1 The overall effectiveness of the preferred option .............................................................. 64 8.2 Impact on stakeholders ...................................................................................................... 65 1 8.3 Synergies with other legislation ........................................................................................ 66 8.4 REFIT (simplification and improved efficiency) .............................................................. 67 9. How would actual impacts be monitored and evaluated? ......................................................... 69 Annexes ............................................................................................................................................... 71 Annex 1: Procedural information .................................................................................................. 71 Annex 2. Stakeholder consultation – Synopsis report .................................................................. 75 Annex 3. Who is affected by the initiative and how? ................................................................... 89 Annex 4. Analytical methods used in preparing the impact assessment ...................................... 95 Annex 5: Policy options detailed measures ................................................................................ 105 Annex 6: Market developments .................................................................................................. 112 Annex 7: Glossary ....................................................................................................................... 160 Annex 8: Mapping of national measures to support borrowers amid the COVID-19 crisis ....... 167 Annex 9: Approach to monetisation of cost benefits .................................................................. 169 Annex 10: References and documentation reviewed .................................................................. 204 Annex 11: List of abbreviations .................................................................................................. 235 2 1. INTRODUCTION: POLITICAL AND LEGAL CONTEXT Political context Directive 2008/48/EC on credit agreements for consumers (“the Consumer Credit Directive” or “the Directive”) aims at securing a consistently high level of protection across the EU for consumers taking out loans, thus contributing to consumer confidence. The Directive also seeks to create the best possible conditions for the free movement of credit offers and to establish a level playing field for providers in different Member States. The Commission evaluated the Directive in 2018-2019, following a 2017 REFIT Platform opinion on Article 4 of the Directive regarding standard information to be provided when advertising consumer credit agreements. In 2020, the Commission presented the results of the Evaluation in a Staff Working Document and an Implementation Report to co- legislators on the Directive, as well as an externally contracted study.1 This full-fledged Evaluation, while establishing that the objectives pursued by the Directive remain relevant, highlighted a number of areas for improvement. The main problems identified include the restricted scope of the Directive, issues about the content and disclosure of information to consumers and insufficient safeguards to ensure responsible lending. The Directive also lacks provisions dealing with events of exceptional and systemic economic disruption (such as the one caused by the COVID-19 crisis). The consumer credit sector has been profoundly transformed by the digital transition. New actors such as peer-to-peer lending platforms have emerged and traditional providers are increasingly using online sales channels. New products such as short-term high-cost loans, that can lead to significant costs for the borrower, are more and more marketed and sold online. The growing use of digital devices affects the way in which pre-contractual information is provided to consumers. Also, automated decision-making for credit scoring and the use of personal data not directly provided by consumers for assessing their creditworthiness raise questions in terms of consumer and data protection and potential discrimination from decisions based on opaque algorithms. Finally, the COVID-19 crisis has greatly impacted the credit market and consumers, especially vulnerable ones, leading to an increased financial vulnerability of many EU households. The von der Leyen Commission through its Work Programme 20202 recognised the significant impact of the digital transition in everyday life and included the need for a Europe fit for the digital age among its headline ambitions. The Commission also committed to giving a new push for European democracy, including by aligning consumer protection with contemporary realities - notably cross-border and online transactions - to empower consumers to make informed choices and play an active role in the digital transformation of society.
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