CUMA Response to Public Consultation on Consumer Credit Directive 2

Unique Reference Number: 
DFIN-C8-6
Status: 
Submitted
Author: 
CUMA - Credit Union Managers Association
Consultation: 
Consumer Credit Directive - CCD2
No. of documents attached: 
0
Author: 
CUMA - Credit Union Managers Association

Cover Letter

The Credit Union Manager's Association (CUMA) is pleased to submit its response to the Department of Finance's public consultation on the EU Member State options for transposing CCD2. CUMA supports stronger regulations to address digitalisation, broaden the scope of CCD1, and improve transparency in contract terms and consumer protection.

Observations

3.4 Article 2(8) of CCD2

Chapter: 
3. Consultation Questions » 3.4 Article 2(8) of CCD2
Question: 
Should Ireland exempt such credit agreements as described above?

Yes, for credit agreements under €200, exemptions from advertising requirements and detailed disclosures should be considered. While consumer awareness is important, excessive regulations can make these products unsustainable and reduce options. A more balanced approach would preserve access to credit.

Credit unions, in particular, play a vital role in offering low-value loans, providing a trusted, regulated choice in the financial sector. By continuing to uphold thorough assessments of borrowers’ repayment ability, reducing regulatory pressures for small loans ensures that these essential financial products remain available. Aligned with a commitment to serving members, credit unions frequently helping individuals manage costlier debt or meet urgent financial demands. This adaptability allows even the most vulnerable individuals to access affordable credit when it is most needed.

3.5 Article 8(8) of CCD2

Chapter: 
3. Consultation Questions » 3.5 Article 8(8) of CCD2
Question: 
Should Ireland prohibit such advertising as described above?

No. Consumers should have the freedom to prioritise what matters most to them in making credit decisions. While interest rates are an important consideration, they are not always the only factor driving the decision. For many, the convenience and speed of an online loan application process may be a deciding factor.

With clear and transparent advertising, consumers should be able to compare various products and select the one that best suits their needs. Therefore, CUMA would not agree that offering discounts based on accepting credit needs to be prohibited. As with any loan, a borrower’s ability and willingness to repay should remain the primary factor in determining whether the loan is granted. Finally, credit assessment criteria should always be robust and in line with regulatory requirements.

3.7 Article 14(2) of CCD2

Chapter: 
3. Consultation Questions » 3.7 Article 14(2) of CCD2
Question: 
Should creditors be allowed to require borrowers to open or maintain accounts as part of the credit agreement for the above purposes?

For context, to obtain a loan from a credit union, the borrower must first become a member by holding a share account with at least one fully paid share, as required by the Credit Union Act 1997. This membership is separate from the credit agreement but is legally required. Credit unions may also use member shares as loan security, preventing borrowers from withdrawing savings while in debt unless approved. Credit agreements often grant the credit union a lien on shares and deposits, allowing funds to be applied toward repayment. CUMA advises against applying a derogation under Article 14(2) to credit unions.

3.8 Article 14(3) of CCD2

Chapter: 
3. Consultation Questions » 3.8 Article 14(3) of CCD2
Question: 
Should creditors be allowed to require borrowers to have an appropriate insurance policy as part of the credit agreement for the above purposes?

CUMA believes the insurance requirement to be reasonable if justified by the credit risk. While not typically part of loan agreements, products like gadget insurance may become necessary as consumer electronics increase in value. In the future, credit unions might require coverage for climate risks, such as flood insurance for home or car loans and travel insurance for weather-related cancellations. As environmental risks grow, it will be harder to oppose insurance requirements aligned with these threats.

3.9 Article 16(4) of CCD2

Chapter: 
3. Consultation Questions » 3.9 Article 16(4) of CCD2
Question: 
Should the use of the terms independent advice and independent advisor or other similar terms be prohibited where these services are provided by the credit provider or credit intermediary?

Credit unions offer various services, including financial reviews and product guidance tailored to members' needs, acting as intermediaries between consumers and product providers. These services are regulated by the Credit Union Act 1997. However, credit unions do not refer to their advice as "independent." This may be worth considering in discussions around the Consumer Protection Code (CP158) and the draft Central Bank Conduct of Business Regulations.

3.13 Article 24(5) of CCD2

Chapter: 
3. Consultation Questions » 3.13 Article 24(5) of CCD2
Question: 
Should there be more stringent consumer protection provisions above those provided for in Article 24 of CCD2?

CUMA believes Article 24’s consumer protection for overdraft services is sufficient, as credit unions already face additional requirements under the Credit Union Act 1997 for their Member Personal Current Account Service (MPCAS). Therefore, CUMA argues that the stricter measures in Article 24 should not apply to credit unions.

3.18 Article 31(2) of CCD2

Chapter: 
3. Consultation Questions » 3.18 Article 31(2) of CCD2
Question: 
Should Ireland provide for any further prohibitions or limitations regarding specific charges or fees applied by creditors?

Credit unions are bound by a monthly interest rate cap of 2%. In addition, legislation passed in April 2024 by the Minister for Finance lifted the longstanding prohibition on loan-related charges, which had been in place for credit unions since 1997. Prior to this change, all charges associated with a loan were incorporated into the interest rate. Given this recent adjustment, CUMA believes that any further restrictions or limitations on specific fees or charges imposed by creditors should not apply to credit unions.

3.19 Article 32(4) of CCD2

Chapter: 
3. Consultation Questions » 3.19 Article 32(4) of CCD2
Question: 
Should Ireland impose a ban on commissions paid by a creditor to a credit intermediary?

CUMA does not believe there is a valid reason to impose a ban on such commissions. Section 26 of the Credit Union Amendment Act 2023 introduces a new provision allowing credit unions to refer members to other credit unions for services such as loans. This arrangement will be governed by a legal agreement that may include commission structures. Therefore, CUMA believes that any prohibition on commissions set forth in Article 32(4) should not extend to credit unions.

3.20 Article 32(5) of CCD2

Chapter: 
3. Consultation Questions » 3.20 Article 32(5) of CCD2
Question: 
Should Ireland prohibit or impose restrictions on the payments from a consumer to a creditor or a credit intermediary prior to the conclusion of a credit agreement?

CUMA does not find it reasonable to impose a prohibition or restrictions of this kind. It seems fair and beneficial for consumers that service providers receive remuneration, regardless of whether the consumer decides to enter into a credit agreement.

3.23 Article 41(9) of CCD2

Chapter: 
3. Consultation Questions » 3.23 Article 41(9) of CCD2
Question: 
Should the Central Bank of Ireland have product intervention powers to direct that products which are contrary to consumer interests are withdrawn?

CUMA wishes to highlight the need for attention as the Central Bank of Ireland updates its regulatory approach to ensure strong consumer protection. Regulators should have the power to quickly remove harmful financial products to prevent consumer exploitation, in line with the Central Bank of Ireland goal to enhance trust in the financial sector. The introduction of a regulatory innovation sandbox will promote innovation while balancing regulation and market competition.

Information

Unique Reference Number: 
DFIN-C8-6
Status: 
Submitted
Date Submitted: 
18.10.2024 - 10:42
No. of documents attached: 
0
Consultation: 
Consumer Credit Directive - CCD2