Tuesday, 9 June 2009

Gold-Plating The Consumer Credit Directive

Yep, the UK's bureaucratic alchemists are at it again, folks. They've taken a leaden, ill-conceived Consumer Credit Directive (2008/48/EC) and extended its application to UK products that are out of scope, "in order to maintain a comprehensive, homogenous set of rules" (see para 1.9), while rigidly interpreting many terms not defined in the CCD to further complicate the awkwardly prescriptive consumer credit regime.

Add to that over 100 pages of impenetrable bureaucratic mumbo jumbo, 68 incredibly complex questions and an implementation deadline of June 2010, and say goodbye to any more retail financial services innovation for at least 2 years while we try to resolve all the uncertainty.

Moreover, the complexity of the one-size-fits-all regime being proposed, save for a 'light-touch' exemption for bank-only overdrafts, will give banks an even greater advantage over non-banks in providing consumer credit. Product development will be constrained by a complex and awkward regulatory regime, leaving many consumers with overdrafts (or loan sharks) as the 'easiest option'. In turn, consumers will be exposed to tighter credit conditions being imposed by banks, who will enjoy an advantage in 'up-selling' their own credit products to the more creditworthy.

Overall, the result will be less choice and poorer value for consumers, and a feast for banks and loan sharks alike.

Gareth Thomas, the Minster responsible, has a lot of explaining to do. But maybe he figures it's all over for him, anyway?

Meanwhile, the so-called "Better Regulation Executive" appears to be sleeping peacefully, secure in the assumption that all this nonsense delivers on a commitment to regulation that is:
  • "transparent" - this extended scope was not revealed as the UK's intention when the CCD was consulted upon at EU level.

  • "accountable" - why should national bureaucrats decide the scope of an EU law?

  • "proportionate" - but it goes beyond the scope of the CCD, and is therefore disproportionate.

  • "consistent" - but it's inconsistent with the CCD, and as such fails to deliver a "harmonised" or consistent cross-border credit market, which the CCD was (misguidedly) intended to catalyse (see Article 22).

  • "targeted" – far from it, these are explicitly described as a "homogenous" set of rules.
Wakey-wakey everyone...

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