Embargo: Immediate Wednesday 5th July 2006

Contact: Owen Williams 020 7219 8659


A report published to today by the House of Lords EU Select Committee has criticised European Commission proposals to harmonise consumer credit legislation across the EU.

The proposals are designed to promote a cross border internal market in consumer credit by allowing lenders in one EU Member State to provide credit to consumers in another. This would replace the 1987 EU Directive in Consumer Credit which lays down EU-wide minimum standards of consumer protection, but crucially, allows nation states to improve on those standards, as Britain has done.

The new Directive proposed by the European Commission aims to eradicate differences in some aspects of national laws to stimulate the growth of a single market in consumer credit. This would involve stopping Member States bringing in or changing laws to give consumers either more or less protection than the common standard. The Lords Committee are concerned that this could weaken consumer protection in the UK where our already high standards were recently reinforced by the Consumer Credit Act. The report stresses that the proposals would also limit the Government's present flexibility to change UK consumer credit laws rapidly through domestic regulation when needed.

The Committee recognise that an effective single market in consumer credit would benefit consumers and lenders alike. But they say this is not the right way to achieve it. Consumer credit suppliers cannot create the necessary volume of business or operate effectively in another EU Member State without setting up or acquiring an establishment there, as some suppliers have already done under the present EU legislation.

Commenting, Baroness Thomas of Walliswood, Chairman of the Committee, said:

"We are concerned that these proposals from the European Commission could undermine important consumer protection measures we have built up in the UK over many years.

"We understand why the Commission want to promote a cross-border internal market in consumer credit. A single market would give consumers more choice and open up huge opportunities for UK finance houses. But the appropriateness and impact of these proposals has not been adequately researched by the Commission. All our evidence shows that they are based on a false premise and we fear they will do more harm than good."

Notes to Editors

1. The report is published by The Stationery Office: Consumer Credit in the European Union: Harmonisation and Consumer Protection, House of Lords EU Sub-Committee on Social Policy and Consumer Affairs, 36th Report of Session 2005-06, HL Paper 210,

2. The full report will be available shortly after publication at:

3. The members of the Committee who conducted the inquiry are:

Baroness Thomas of Walliswood (Chair)

Lord Colwyn

Earl of Dundee

Baroness Gale

Baroness Greengross

Lord Harrison

Baroness Howarth of Breckland

Baroness Morgan of Huyton

Lord Moser

Baroness Neuberger

Lord Trefgarne