subject: European Union Brings about Huge Changes to Borrowing [print this page] European Union Brings about Huge Changes to Borrowing
Assuming that you have hunted for any kind of consumer credit, you should understand what a complicated thing it can be. Working out Annual Percentage Rates (APRs), rates of interest, rates and charges can be utterly nightmarish though as of February 1st 2011 brand new European Union rules were enforced to make the job of borrowing money easier to understand and also the cost of finance a great deal more truthful.
New legislation
Though features of the directive are already part of our laws, the most recent addition appeared in the form of the Consumer Credit (Advertisement) Regulations 2010; an improvement on the previous advertising and marketing guidelines for financial credit products.
The new 2008 Consumer Credit Directive focuses on transparency and consumer rights with an onus on lenders, brokers and other organisations selling consumer credit products to be more truthful with borrowers. Now governed by stricter advertising instructions, any time an APR rate is publicised, lenders are required by law to incorporate ALL of their loan fees and hidden charges in what is called a 'representative example'.
The term 'representative example' represents a collection of EU standard, comparable information which allows customers to take a look at an illustrative credit amount, the borrowing rate, any other fees and the representative annual percentage rate (APR) - a vital change to come from the new legislation.
Up to now, lenders have commonly charged customers, a range of APRs for identical products... but this is set to change. By working with representative APR, the EU is set on minimising this practice and from now on insists on companies producing an annual rate that is made up of all charges and costs and is also representative of the rate that 66% of former customers have paid (within the past year) and an accurate idea of what at least fifty percent of new customers can hope to pay.
How the brand new legislation has an effect on us as consumers:
Admittedly the brand new directive is a little tricky to work out but there are actually only three points you ought to understand.
1) Hidden charges are exposed
With the administration of representative examples and representative APRs, these hidden extras, legally, must be laid bare, making it possible for customers to quickly identify rip-off loan companies who are cashing in on extra expenses
2) Loan costs are easily compared
With APRs now being inclusive of all costs and all info outlined in the representative example, potential borrowers can see clearly and quickly what the overall cost of a loan is going to be. This new level of opacity will give customers (and business competitors) a new level of comparison that will allow them to simply shop around for the right credit product suitable to them and their circumstances.
3) Borrowers will benefit from a better legal standing
The brand new directive makes the legal rights for customers significantly better.. After signing into a credit contract, individuals will now have the ability to pull out from the contract within 2 weeks without the need to give a reason and, maybe best of all, at no cost. .
Also, previously customers were only in a position to pay back the full unpaid amount prior to the set repayment date, but the new rules mean that customers will have the right to make partial payments ahead of the repayment date, making it easier to pay the amount off quicker.
When it comes to consumer credit products, for a long time customers have had the wool pulled over their eyes, but these new changes mark a brand new time for borrowing.The directive and its alterations will promote a new generation of responsible lending and will help consumers be in a situation to make well informed decisions with regards to their financial circumstances.
