CCPC Consumer Credit Directive - CCD2 Submission

No, credit for amounts under €200, that are interest free or repayable within three months should not be exempt from the provisions of the CCD2.  

During financial pinch points for consumers throughout the year, for example Christmas or Back to School, consumers may require credit of under €200. Others may need relatively small amounts of credit to pay bills, heat homes or buy food.

Central Bank Buy Now Pay Later (BNPL) research in 2023 found that a portion of BNPL users report using this form of credit to pay for clothing and footwear (41%), cosmetic products (19%), homewares (25%) and even for medical and dental treatment (27%). This use of credit to pay for everyday items is evident from Experian UK’s 2022 data gathered from BNPL lenders which found, that while some consumers use BNPL for high value purchases, 95% of BNPL purchases were for items costing £180 (€215) or less. The average purchase using BNPL was £65 (€77).

These type of credit agreements for lower cost goods and services could be numerous and may be taken out with various credit providers. The consumer may not be able to keep account of the various credit agreements taken out, or indeed be able to pay back the credit in time to avoid charges and penalties. By dispensing with the provisions of CCD2 on advertising and precontractual information for this category of credit, it may be easier for the consumer to accumulate multiple unmanageable debts.

Some consumers may not know that they are purchasing items or services on credit, given the interest free element and that repayment windows are relatively short - within three months. There is a possibility that other forms of credit, such as credit cards and overdrafts, may be used to pay back these sub €200 borrowings. This can compound difficulties for consumers as they pay interest on top of interest to service these debts.

Yes, in certain circumstances, credit providers should adapt explanations to consider the consumer’s vulnerable circumstances and the type of credit that is being offered. Consumers seeking credit may be vulnerable due to their age, circumstances (e.g. financial abuse) or impaired decision making. Credit providers and credit intermediaries should ensure credit offered is not only explained clearly, but understood by all consumers, including those defined as being vulnerable.  

The Central Banks’ Revised Draft Consumer Protection Code includes welcome obligations on financial service providers to ensure they provide reasonable assistance to vulnerable consumers. However, complex financial products, and their credit agreements, need to be fully understood not only by the vulnerable consumer, but by all consumers.  

Most banks have vulnerable customer units, however the withdrawal recently in Ireland of two major banks brought into sharp focus their capacity, and the capacity of their customer facing staff to deal with complex vulnerable customer issues.

Credit providers have a particularly important role in financially safeguarding vulnerable consumers in relation to credit agreements. Staff need to be trained and supported in the provisions of the Assisted Decision-Making (Capacity) Act 2015 to ensure that vulnerable customers are provided with the necessary relevant information to make informed and considered decisions around obtaining credit.

The Central Bank in March 2024 issued Guidance on Protecting Consumers in Vulnerable Circumstance. The CCD 2 regulations in Ireland should consider the needs of vulnerable consumers in the provision of credit and this consideration should be time and issue specific to the circumstances of the consumer.

No. If suitability and creditworthiness checks are performed adequately by credit providers, for many borrowers, there should be no need for this extra security. The requirement to have an appropriate insurance policy should not be a precondition in many cases when providing credit.

The consumer should retain the right to take out their own payment protection insurance on a loan should they choose to do so. If the consumer chooses an insurance policy for a credit agreement, the credit provider should ensure that this policy is suitable for the consumer and tailored to their circumstances. Due attention should be given by the credit provider to ensuring insurance policies are not ineffective and should take care to avoid any mis-selling of payment protection insurance.

Yes, the Central Credit Register is an appropriate tool to assess creditworthiness and gives the credit provider a sound basis to assess suitability. Consideration may need to be given to including credit of less than €500 on the Central Bank’s Central Credit Register.

It is of course incumbent on credit provider to also assess creditworthiness and suitability in other areas of a consumer’s financial health.  This may involve seeking verification of income, future income and determining the expenditure and future contingencies of a credit applicant or joint applicants.

Yes, there should be more protections for overrunning current accounts.

In relation to withdrawing an overrun facility, a notice period of 90 days, instead of the 30 days outlined in Article 25 (4), should be given to the consumer informing them of the overrun facility withdrawal.

In general, the CCPC opposes the introduction of capping interest rates. Such caps mostly do not achieve the intended outcomes, but instead serve to reduce competition with the cap effectively becoming a target. However, the CCPC agreed with the interest rate cap on high cost credit, as set out in the Consumer Credit (Amendment) Act 2022, on the basis that it believed that the potential for mitigating consumer detriment, particularly for vulnerable consumers, posed by the possibility of increased rates in the future had merit.

The CCPC recommended that the cap on high cost credit be subject to regular review by the Central Bank of Ireland and this provision is within the 2022 Act.

No, costs should be borne at the expense of the credit provider.  The court can decide to award costs and interest on judgment debts, should the credit provider wish to pursue this course of action. Before the provider does so however they should endeavour to resolve arrears cases with the consumer at the earliest opportunity to ensure there is no overcharging for consumers in default.

If it is to be decided that there are cost-recouping charges on consumer default, then these costs should be clearly indicated within the credit agreement. There should also be a limit on the charges, and a cap put on their accrual and length of time that they accrue for– i.e. a maximum of 4 monthly surcharges after which time the account will go into late-stage arrears, where accruing interest and charges will cease, and the final debt will be crystalised. This will reduce the accruing cost for the borrower who is already in financial difficulty. Should the credit provider revert to legal action to recover the debt, which is their right, then the costs of taking such action will be at the credit provider’s own expense.

The credit provider gives credit at their own risk and should perform the necessary credit worthiness and suitability checks. They are free to set the interest rate it deems necessary to allow for bad debts. The borrower in arrears should not necessarily have their financial difficulty compounded by accruing surcharges and interest, or by costs charged to them by the credit provider to recoup the debt. Credit accounts that are in arrears should not be allowed to accrue interest and charges indefinitely.