Five Questions About: The consumer credit directive
What is the Consumer Credit Directive?
It is a European Council initiative designed to improve transparency for people comparing credit products within the EU. From 1 February, it will affect how companies display information about deals such as credit cards and personal loans. While it is something for financial providers to worry about, rather than consumers, it will change the information you're offered when you browse. It could also affect your likelihood of being offered the headline rate.
How will it affect what I see?
From February, when a rate is published, perhaps on a lender's page or through a price comparison site, it must be accompanied by a "representative example". This needs to include an example credit amount, the borrowing rate, any additional charges and the representative annual percentage rate (APR).
What is the representative APR?
At the moment, when you compare credit, you are shown a "typical APR" – the rate offered to at least 66 per cent of successful applicants. However, from next month, you will be shown a representative APR – which must be offered to just 51 per cent of accepted borrowers, so fewer people will get the advertised rate. Lending such as mortgages and secured loans will still be based on typical APRs.
What extra information will I get?
The example you're given should make borrowing the costs clearer. For example, if comparing credit cards, you could see the following: "Example: If you spend £1,200 at an annual interest rate variable of 8.2 per cent and an annual fee of £150, your representative APR is 8.9 per cent." Also, borrowers with fixed-term loans will be able to request a statement of their account as often as once a month.
Any other benefits?
You'll have the option to cancel a credit card or loan agreement within 14 days of signing up. Plus, you'll be able to make partial early payments to clear your debt at any time, although you may have to pay a fee of up to 1 per cent of the amount you're repaying early.
It looks very much as though 2015 will be a good year for the world economy, after all – and, if it is, that will be thanks to the fall in the oil price. It won't be good for everyone and we have already seen the pressure it puts on the Russian leadership – though, before you conclude that sometimes there is natural justice in the world, remember that the people who are hurt are not leaders such as Vladimir Putin. Other oil- and gas-exporting countries are damaged, too, and I think we will see further fallout in unpredictable ways. But the net impact is strongly positive, more so than most commentators at present acknowledge. The winners far outnumber the losers.
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