The Association of Finance Brokers has welcomed the news that the European Parliament has adopted the Consumer Credit Directive.
The adopted Directive includes an amendment from AFB, which prevented a proposed ban on commission. The European Parliament adopted the directive last week and member states will have two years to enact the legislation.
Although the directive does not directly affect members, the unintended consequences could create the most significant changes within the second charge lending market to date.
Robert Sinclair, director at the AFB, says: “We announced in January that AFB and AMI had lobbied tirelessly to amend the CCD in the European Parliament. As it originally stood the directive was set to ban the payment of commission, a principle that would have severely impacted upon our members and greatly restricted consumer choice. Through our concerted efforts Article 21 of the directive was amended to ensure that consumers have the option to pay intermediaries with a combination of fees and commission. It is good news for members that the amended directive has now been adopted by the European Parliament.
“Because the CCD will force the Government to make further substantial revisions to the UK Consumer Credit Act, it will inevitably cause substantial changes to secured-loan brokers. At present, it is unclear exactly what shape those changes will take. However, there are a number of possibilities including the creation of a two-tier CCA, the gold-plating of the CCD requirements to all CCA regulated products including secured-loans, or even possible pressure to reclassify secured-lending with other land-secured debt, under FSA regulation.
“This result for the industry demonstrates the value of a robust and influential trade body, which represents its member’s interests not only at home, but at a European level. Had we not acted when we did the outcome could have been devastating for our industry. We recognized a threat to our members, which other representative bodies had failed to identify, and we acted.”
AFB will be producing a White Paper on the future of regulation for second charge lending, which should be published in June. This document will consider the options, and implications of the CCD, and will propose solutions for the sector.