Information disclosure in the EU Consumer Credit Directive: opportunities and limitations

Abstract

Any system of consumer credit regulation is based both on conceptions of the legitimate function of credit in society and on assumptions pertaining to how creditors and debtors think, decide and operate. For instance, information disclosure duties in consumer regulation are predominantly based on the assumption that consumers are able to read and understand mandatorily disclosed information and that they are thus empowered to make better (rational) choices after having received information on the benefits and dangers of particular transactions. However, the concept of the well-informed, average consumer who only needs full information to choose alludes to a mythical figure. This seems especially true in the area of financial services because there the legislative framework hardly ever takes into account outright irrational consumer behaviour. Furthermore, where consumers face difficulties in processing information on credit or interest cost and terms, the complexities of credit products may provoke commercially profitable but dubious and deceptive practices. The provisions of the Directive 2008/48/EC on Credit agreements for consumers and repealing Council Directive 87/102/EEC (hereafter: EU Consumer Credit Directive) predominantly follow the abovementioned information paradigm. It promotes consumer autonomy by aiming at enabling consumers to make informed decisions. To this end, it imposes information duties on the creditor and credit intermediaries by means disclosure of information to be included in advertising with figures relating to the cost of credit and disclosure of information to be included in the credit agreements. Moreover, by using a Standard European Consumer Credit Information (hereafter: SECCI) it also regulates the form in which specific information must be conveyed to consumers in the pre-contractual stage. Such standardization of information appears to aim at avoiding information overload and at maintaining or allowing the comparability of different offers. Against this background, we will look into both the opportunities and the limitations of information disclosure duties encapsulated in the EU Consumer Credit Directive. Moreover, focusing on less-than-rational and cognitively distorted thinking and deciding involved in consumer borrowing behaviour, we draw attention to the question whether and to what extent information disclosure duties can actually improve the quality of contractual choice and lead to responsible borrowing. As the Directive aims at full harmonization, it leaves little room for manoeuvring at member state level. This may be at odds with the need felt by domestic policymakers for a more interventionist approach.