Borrowers are set to benefit from new lending standards which came into force with the introduction of the EU consumer credit directive.
The directive, introduced yesterday (1 February) heralds significant changes to the way lenders sell their products and the charges attached to them.
From now on lenders will have to provide more information on their products before a credit agreement is signed, and must use “representative” advertising to give customers examples of how their products work, as well as providing examples of how interest charges operate on individual products.
Lenders will also need to re-draft their standard form credit agreements to take account of the changes, otherwise these agreements could become unenforceable. Meanwhile consumers will be given the right to withdraw from their agreement within 14 days and will be allowed a rebate of interest for making partial early repayments, a right that only exists currently if consumers settle their credit agreement in full.
Jeff Vernon, legal director in the commercial finance department at DLA Piper, said: “The new rules are part of the process of ensuring that customers are better informed about credit agreements and any attendant risks that may arise from taking them. This will have a number of far reaching consequences for both businesses and consumers.”