Adoption of a new directive modernising credit for consumers

On 30 October 2023, Directive (EU) 2023/2225 of 18 October 2023 on credit agreements for consumers (the “Directive”) was published in the Official Journal of the European Union. The directive promotes the provision of financial services within the internal market and reflects the shift to digital technology while ensuring a high level of consumer protection.

The Directive also repeals the 2008/48 directive on consumer credit while keeping many of its elements.

The Directive reflects the shift to digital technology, which has led to the emergence of (i) new products, (ii) new means of publication of information, and (iii) changes in consumer preferences. New players have also emerged, in particular digital platforms operated by providers of crowdfunding credit services and other creditors and credit intermediaries which are neither credit institutions, nor payment institutions. These players will now be subject to an appropriate admission procedure, registration and monitoring arrangements established by an independent competent authority.

The Directive does not cover i.a. (i) credit agreements secured by a mortgage, (ii) credit agreements involving a total amount of credit of more than EUR 100 000, (iii) hiring or leasing agreements where an obligation or an option to purchase the object of the agreement is not laid down either in the agreement itself or in any separate agreement, (iv) certain deferred payments.

However, the Directive has a broader scope than Directive 2008/48. In particular, it applies to (i) credit agreements involving a total amount of credit of less than EUR 200, (ii) credit agreements where credit is granted free of interest and without other charges, the so-called buy now pay later arrangements (unless certain conditions are complied with), (iii) credit agreements under the terms of which the credit must be repaid within three months and only insignificant charges are payable, (iv) certain credit agreements in the form of deferred debit cards and (v) credit agreements involving a total amount of credit of more than EUR 100,000 and which are not secured by a mortgage, where the purpose of those credit agreements is the renovation of a residential immovable property.

Prior to the conclusion of the credit agreement, the creditor may carry out any advertising and commercial communication relating to credit agreements if it is fair, clear, and not misleading. Advertising that encourages consumers to seek credit by suggesting that credit would improve their financial situation or that highlights the ease or speed with which credit can be obtained is prohibited.

Standard pre-contractual information (such as a warning that borrowing money costs money, a representative example, a warning of the legal and financial consequences of non-compliance with the other commitments linked to the credit agreement, a repayment schedule, etc.) obligations are reinforced.

The Directive sets out requirements regarding the manner in which the consumer's consent is obtained. The conclusion of any credit agreement or to the purchase of ancillary services presented through boxes must be given by an unambiguous, clear affirmative act establishing a freely given, specific, informed and unambiguous indication of the consumer’s approval to the content and substance associated to the boxes (e.g. by ticking a box).

The obligation for the creditor to assess the consumer's creditworthiness is reinforced. In this respect, the creditor sets up and maintains procedures for assessing the consumer's creditworthiness. Before concluding a credit agreement, the creditor must carefully assess the consumer's creditworthiness in the consumer's interest, in particular on the basis of relevant and accurate information obtained from the consumer, collected and transmitted by the credit intermediaries (if any) and verified in an appropriate manner. The consumer is entitled to human assessment of its creditworthiness.

The consumer may withdraw from a credit agreement without giving any reason within a period of fourteen days. This right is extended to one year and fourteen days if the consumer has not received the contractual terms and conditions and mandatory information. The consumer may also, at any time and free of charge, terminate an agreement entered into for an indefinite period of time, unless the parties have agreed on a period of notice which may not exceed one month.

Rules of conduct and requirements apply to the staff of the creditor and of the credit intermediary when providing credit agreements to consumers. Relevant entities are required to have a remuneration policy in place which enables the entity to comply with such rules of conduct. Furthermore, creditors and intermediaries ensure that members of staff have appropriate knowledge and skills regarding the elaboration, offering, and granting of loans.

Finally, financial education and support to consumers in financial difficulty can take the form of (i) reasonable forbearance measures with the creditor before enforcement proceedings are initiated and (ii) advisory services for persons in debt.

The Directive also supplements Directive 2002/65 concerning the distance marketing of consumer financial services.

Member States have until 20 November 2025 to implement the Directive into national law. Implementing measures shall apply from 20 November 2026. On the same date, Directive 2008/48 will be repealed.

Should you have any questions on the above, please do not hesitate to contact one of our experts in the regulatory team.