EU to shut down 'misleading' loan websites
In the UK, 38 out of 47 loan sites checked failed to provide basic required information
The EU is cracking down on loan websites after an investigation revealed that 70 per cent are operating outside the law by misleading borrowers about credit deals.
In Britain, the figure was even higher with 81 per cent – 38 out of 47 – of loan sites checked failing to provide required information or presenting costs in a misleading way.
The EU Consumer Commissioner John Dalli said: "Online credit often turns out to be more expensive than it had originally appeared, because important information is sometimes unclear or missing."
The EU is investigating 393 of the 562 websites that it originally checked across its 27 member states. It warned that it will fine and close repeat offenders.
The most common rule-breaking was failing to include an annual percentage rate (APR) or other essential information. It is mandatory under the EU Consumer Credit Directive as without the APR borrowers can't easily compare the cost of credit.
Other mandatory information missing was whether charges on other deals such as insurance were included in the total cost and the length of the credit agreement. Some 46 per cent of the loan websites investigated failed to provide this basic information.
Meanwhile 43 per cent of them left out key information about their credit offer, such as the type of interest rate, the duration of the loan or if there was an arrangement fee. A fifth of the sites actually misled consumers by displaying the cost of credit in a way "which is false or could deceive consumers," according to the Commissioner.
The websites targeted by the EU enforcement officers in the Europe-wide sweep included payday loan firms, credit card companies and car loans.
"Consumer credit is not always easy to understand, which is why there is European legislation in place to help consumers," said Mr Dalli. "
He has asked financial authorities across Europe to contact the operators of the websites concerned to explain why they have been flouting the rules. They have been asked to report back to the EU by autumn, when the Commission will name and shame companies that have been fined or shut down as a result of the investigation.
John Moorwood of the online lender Wonga, said: "We welcome moves to encourage lenders to be clearer with consumers about pricing. This issue certainly isn't confined to short-term credit, however, and we'd like to see more transparency across all forms of credit."
Across Europe consumer credit is big business. The EU said that in 2010, financial institutions in the eurozone had more than €600bn outstanding in loans or credit to consumers.
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