The Consumer Credit Directive is being reformed, and the challenge is to reconcile the efficiency of the single market with a high level of consumer protection. Dr Udo Reifner, who for decades has worked in different ways to promote consumers' position as users of financial services, has emphasized lenders' social responsibility. Social responsibility is not just complying with minimum statutory requirements. A lender's social responsibility can be evaluated on the basis of the content of products, advertising, contract terms, debt collection and how profits are used.
Dr Reifner was a key figure at a conference on responsible credit that was held in Brussels. The same matters concerning lending cause concern around the world: how difficult terms and the content of contracts can be expressed in such clear form that responsibilities and obligations do not come as a surprise, how consumer information reaches the target, how to achieve balance in contracts - and above all how the lender's responsibility can be shown if the debtor has trouble making payments. Debt problems are destructive for society as a whole, as we have also seen in Finland. They cannot be eliminated entirely, since surprising and bad things happen and then even careful plans can go awry. Debt adjustment legislation is needed, but it cannot be the only way to resolve debt problems. Responsibility on the part of lenders is necessary to prevent problems. Lending involves a relation between a professional and an amateur. As in other services the professional, the lender, must use his expertise taking into account the consumer's interests. Asking the right questions makes it more likely to achieve an effective result. This does not mean a Big Brother attitude and questioning the consumer's answers, however. Responsibility in lending is also expressed in contacts during the credit relation and not just collection measures if payments are late.
In Finland new products have come on the market, particularly more flexible loans that do require collateral. This is all very good. Competition is not sufficient, however. Consumers still cannot purchase loan security insurance from a competing company's range but must buy it from the same place where they get a loan. When consumers purchase appliances or furniture, the picture is not so good, since nowadays the only option seems to be credit accounts. Instant loans that can be arranged with a text message are another alternative, but they are not very attractive. The reception at the Brussels conference was mainly dubious. A credit relation cannot be entered so easily without a written contract in every country. The high interest rate also raised eyebrows. For example, English organizations lobby: "You wouldn't pay 177 APR on a loan. Why should people on low incomes?"
In principle a consumer cannot get collection agencies to compete even if he pays the costs. Increasingly it can even happen that a creditor sells a receivable and the buyer tries to make a profit on debt. In recent weeks old mobile phone bills have been in the news for this reason. The new creditor believes it is entitled to collected higher charges than the Debt Collection Act allows. A flexible solution was proposed: taking the case to the Consumer Complaint Board and then both parties would act according to its recommendation. After all thousands of consumers are involved in this matter. The creditor did not accept this model, however, since the Consumer Complaint Board can only issue recommendations. What happened to all the fine talk according to which class actions are not needed because businesses comply with the Consumer Complaint Board's recommendations? It was not true in this case at any rate.
Anja Peltonen
Editor-in-Chief, Director of the Consumer Law Division