Some experts warned today that the looming Consumer Credit Directive could lead to customers being charged higher interest rates on their unsecured personal loans and credit cards. The directive comes into effect on 1 February and it requires any company or bank offering products such as credit cards and personal loans to offer just 51 per cent of successful applicants the “typical” rate of interest as seen in their promotional material. Before the directive, this figure stood at 66 per cent. Although some commentators have said that the European directive will give greater transparency to the acquisition of personal loans and other forms of personal credit, the Daily Telegraph News website reported the concerns of some analysts who believe many borrowers could end up paying a higher rate of interest than they originally bargained for. Moneysupermarket head of loans and debt Tim Moss told the newspaper that, although it was a welcome development to see greater transparency, the fact that fewer applicants will end up with the advertised interest rate could be seen as a backwards step. “There is also a danger lenders could take advantage of the Consumer Credit Directive as they will be able to offer higher than advertised rates to a much higher proportion of successful applicants,” he said. “Ultimately consumers will always need to borrow money and the best defence against the new regulation is for borrowers to check their credit profiles, understand how the application process works and choose wisely when applying for any credit product.” The directive intends to modernise credit legislation and make it the same across the European Union.

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Warning Over Pitfalls of Consumer Credit Directive