Consumer credit agreements (2023)

 

SUMMARY OF:

Directive (EU) 2023/2225 on credit agreements for consumers and repealing Directive 2008/48/EC

WHAT IS THE AIM OF THE DIRECTIVE?

It sets out European Union (EU) rules on consumer* credit agreements*.

KEY POINTS

The directive:

• applies to credit agreements whereby consumers borrow money to buy goods and services;
• does not apply to certain categories of agreement, notably:
  • credit agreements secured by a mortgage or another comparable security on immovable property;
  • credit of over €100,000;
  • employer free or low-interest credit schemes for employees;
  • deferred payments under certain conditions;
  • hiring or leasing agreements which do not offer or require purchase of the item concerned;
• allows EU Member States to exempt from the EU rules certain agreements, such as those linked to deferred debit cards under certain conditions;
• requires that the information supplied to consumers under the EU rules be given free of charge;
• stipulates that providers of credit to legal residents in the EU cannot discriminate on grounds of nationality, place of residence or other factors such as sex, race or colour listed in Article 21 of the Charter of Fundamental Rights of the European Union.

Information requirements prior to an agreement

Advertising and marketing

• All communications must be fair, clear and not misleading.
• Adverts must include the warning: ‘Caution! Borrowing money costs money.’ or equivalent phrasing.
• The directive bans misleading advertising that:
  • suggests credit would improve consumers’ financial situations;
  • specifies outstanding credit agreements or databases that have little or no influence on a credit application assessment;
  • indicates falsely that credit increases financial resources, savings or living standards.

Member States may ban advertising that:

• highlights the ease or speed of obtaining credit;
• makes a discount conditional on taking up credit;
• offers grace periods of over 3 months for repayments.

Standard advertising information must:

• be easily legible or clearly audible;
• specify the following clearly, concisely and prominently:
  • borrowing rate, including any charges,
  • total amount of credit,
  • annual percentage rate of charge (Annex III sets out how this is calculated),
  • duration of the credit agreement, where applicable,
  • total to be paid by the consumer and amount of instalments, where applicable;
• contain a representative example of the various terms.

General information must:

• be clear and comprehensible and available on paper or on another durable medium chosen by the consumer;
• contain at least the following:
  • identity and contact details of the information provider,
  • purposes for which the credit may be used, duration of the agreement and possible further costs,
  • available borrowing rates and example of the total cost to the consumer,
  • a range of reimbursement options, conditions for early repayment and right of withdrawal details,
  • an indication of any ancillary services required to obtain the credit,
  • a general warning on possible consequences of not complying with the terms of the agreement.

Pre-contractual information must:

• be provided to the customer ‘in good time’ and contain adequate explanations, so they can compare different offers and take an informed decision before being bound by an agreement;
• contain all the elements in the standard European consumer credit information form set out in Annex I, with the main details on the first page;
• use the European consumer credit information form in Annex II for credit agreements which are concluded by organisations operating for the mutual benefit of their members;
• inform customers when presenting them with a personalised offer based on automated processing of personal data.

The directive:

• bans ‘tying’, unless the credit agreement is not available separately from other financial products or services on offer;
• permits ‘bundling’, where the credit agreement is available separately but not necessarily on the same terms and conditions as when bundled with other products or services on offer;
• allows creditors to require a customer to open or maintain a payment or savings account to accumulate capital or service the credit, or to hold a relevant insurance policy;
• bans the use of any personal cancer data for an insurance policy within 15 years after the end of treatment;
• requires creditors to explicitly inform consumers whether ancillary services are being, or can be, provided to them; the agreement of the consumer will not be inferred for the conclusion of any credit agreement or for the purchase of ancillary services presented through default options (such as pre-ticked boxes);
• lays down clear rules on the provision of advisory services;
• prohibits any granting of credit without a consumer’s prior request and explicit agreement.

Creditworthiness assessment, databases and contracts

Creditors must thoroughly assess and verify a consumer’s creditworthiness, examining relevant and accurate information on their income, expenses and other financial and economic circumstances.

Member States must, in the case of cross-border credit, ensure access for creditors from other Member States to databases used in that Member State for assessing the creditworthiness of consumers. The conditions for access to such databases shall be non-discriminatory.

Credit agreement contracts must contain similar information to that provided in the pre-contractual phase, but in greater detail.

Creditors must inform consumers of:

• modifications in the terms and conditions in the agreement before making them and, where applicable, the need for consumer consent or an explanation of the changes introduced by operation of law*;
• changes in borrowing rates in good time, before they come into force;
• each reduction or cancellation of the overdraft facility, at least 30 days prior to the day when the actual reduction or cancellation of the overdraft facility takes effect;
• the financial details of any overrunning* facility in the agreement.

Consumers:

• can withdraw from an agreement within 14 days without giving a reason;
• may end an open-ended credit agreement free of charge at any time, unless it contains an agreed notice period, which may not exceed 1 month;
• have the right to make an early repayment, provided the creditor receives fair and objectively justified compensation.

Member States:

• apply measures to prevent abuse and ensure consumers are not charged excessively high borrowing rates;
• require creditors and any intermediaries to act honestly, fairly, transparently and professionally, taking account of their customers’ rights and interests;
• set minimum knowledge and competence requirements for creditors and their staff;
• promote financial education for consumers on responsible borrowing and debt management;
• require creditors to exercise, where appropriate, reasonable forbearance before enforcement proceedings are initiated;
• ensure independent debt advisory services are available to consumers in difficulty with their financial commitments;
• subject creditors and credit intermediaries to admission, registration and supervision requirements, overseen by an independent authority;
• provide consumers with access to adequate, prompt and effective out-of-court dispute resolution procedures;
• appoint authorities to implement the directive and determine penalties for infringements.

The European Commission:

• has the power to adopt delegated acts;
• assesses, by 20 November 2025, whether the legislation should protect consumers borrowing and investing via crowdfunding platforms which, although not acting as creditors or intermediaries, facilitate credit between consumers;
• evaluates the directive by 20 November 2029 and every 4 years thereafter.

The directive repeals Directive 2008/48/EC on consumer credit agreements from 20 November 2026.

FROM WHEN DO THE RULES APPLY?

The directive had to be transposed into national law by 20 November 2025. These rules should apply from 20 November 2026.

BACKGROUND

For further information, see:

• Consumer credit (European Commission).

KEY TERMS

MAIN DOCUMENT

Directive (EU) 2023/2225 of the European Parliament and of the Council of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC (OJ L, 2023/2225, 30.10.2023).

RELATED DOCUMENTS

Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, pp. 66–92).

Successive amendments to Directive 2008/48/EC have been incorporated into the original text. This consolidated version is of documentary value only.

last update 04.01.2024