Irresponsible Lending in the Post-Crisis Era: Is the EU Consumer Credit Directive Fit for Its Purpose?

Journal of Consumer Policy, Vol. 42, No. 4, pp. 483-519, 2019

University of Groningen Faculty of Law Research Paper No. 5/2020

39 Pages Posted: 8 Feb 2020 Last revised: 12 Mar 2020

See all articles by Olha O. Cherednychenko

Olha O. Cherednychenko

University of Groningen - Faculty of Law

Jesse M. Meindertsma

University of Groningen

Date Written: May 1, 2019

Abstract

More than a decade after the outbreak of the global financial crisis, consumers across the EU have been increasing their level of debt in terms of both volume and value of consumer credit products. Among the reasons for this trend are the low interest rate environment, the novel business practices of lenders aimed at finding new revenue sources, such as fees and charges on loans, and the innovative business models emerging in an increasingly digital marketplace, such as peer-to-peer lending. These developments present new risks to consumers and pose new challenges for regulators in terms of how to address them. This article aims to uncover the problematic aspects of consumer credit provision in the post-crisis lending environment across the EU and to assess to what extent the 2008 Consumer Credit Directive currently in force, which aims to ensure adequate consumer protection against irresponsible lending, is fit for its purpose today. In this context, the article explores the general meaning of “responsible lending” with emphasis on consumer credit, identifies the most imminent irresponsible lending practices in the consumer credit markets, and tentatively analyses their key drivers. It also reveals some important limitations of the Consumer Credit Directive in providing adequate consumer protection against irresponsible lending and offers tentative recommendations for improvement. In the authors’ view, the time now seems ripe for striking a different balance between access to credit and consumer protection in European consumer credit law.

Keywords: Consumer Credit, Responsible Lending, Consumer Credit Directive, High-cost Credit, Cross-selling, Peer-to-peer Lending

Suggested Citation

Cherednychenko, Olha O. and Meindertsma, Jesse M., Irresponsible Lending in the Post-Crisis Era: Is the EU Consumer Credit Directive Fit for Its Purpose? (May 1, 2019). Journal of Consumer Policy, Vol. 42, No. 4, pp. 483-519, 2019 , University of Groningen Faculty of Law Research Paper No. 5/2020, Available at SSRN: https://ssrn.com/abstract=3521482

Olha O. Cherednychenko (Contact Author)

University of Groningen - Faculty of Law ( email )

9700 AS Groningen
Netherlands

Jesse M. Meindertsma

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

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