Full harmonisation is the best solution to make it easier for consumers to shop around the European Union for a cheaper personal loan, it was claimed today.
New legislation, which updates 20-year-old EU rules, will govern how the annual interest rate on a loan should be calculated and presented to consumers, and how much lenders should be compensated for early repayments.
Luxembourg minister Jeannot Krecke, echoing most EU states, said full harmonisation was simplest as the alternative would be consumers grappling with a variety of legal systems, particularly in smaller countries that have many borders. That would simply be chaos," he said.
EU Consumer Protection Commissioner Marcos Kyprianou said the current rules, based on minimum harmonisation, had failed to create a single market in consumer credit.
The new rules will give consumers more choice when they need a loan by encouraging competition among lenders.
Critics said some existing national rules gave consumers better protection, but current EU president Austria said a broad majority clearly favoured full harmonisation and that a working group would be set up to take the legislation forward based on this.
The European Commission, which drew up the directive, has tried to mix bloc-wide rules and flexibility to retain national rules for some aspects.
But a majority of EU states told a meeting of competitiveness ministers today that such a mix would be a recipe for legal uncertainty, dismissing pleas from Germany and Britain to retain national leeway in new European Union rules.
Hungary also gave its backing to Germany and Britain.
Finland, which holds the rotating EU presidency from July, said it hoped for political agreement before the year's end.