Credit-10 Experts Talk About Responsible Lending In European Countries
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Responsible lending has been an area of focus for European lending regulators for years. The effort to ensure responsible lending practices has intensified recently as European regulators have become even stricter to protect consumers and borrowers from garnering excessive debt that would be a bother to repay.
Credit-10 experts note that borrowing has risen in numerous guises across the continent. In January this year, the Bank of England reported that British consumers borrowed an additional 1.5 billion pounds in consumer credit plus an additional 1.2 billion pounds in credit card borrowing. This data is 0.7 billion pounds above the amount borrowed in October 2022.
This has pushed lenders to be more conscious of responsible lending practices. Hence, they have begun to act more cautiously as the threat of defaulting borrowers looms. Following this new development, the European Central Bank has reported tightening bank conditions when granting consumer credit. 22% of lenders reported introducing stricter loan criteria compared to 11% in the third quarter of 2022.
Credit-10 analysts agree that this stringent approach adopted by banks of recent might be a wise decision, considering the current recession uncertainty. However, it is also noteworthy that this might create room for irresponsible lenders to step in.
To prevent this and also protect borrowers from acquiring insurmountable debt, the European Union has adopted several measures through a provisional agreement. With these measures in place, it has become almost impossible for consumers to be charged excessive interest rates, annual rates, or charges on the total cost of credit or loans.
The new regulations will also outlaw marketing that entices customers to apply for loans by implying that doing so will enhance their financial status or raise their level of living. They will also include the right to early repayment and any corresponding decrease in overall costs, as well as the ability to cancel a loan arrangement without giving a reason within 14 days.
To enhance responsible lending practices, European regulators implement strict measures. For example, the Financial Conduct Authority (FCA) has introduced Consumer Duty as a strategy to set higher consumer protection standards for financial institutions. These new standards are set to begin effect by July 2023. The regulators also noted the potential for a struggle risk to apply the Consumer Duty effectively by July, as some firms are lagging in their planning. However, the regulator has urged all firms to quicken the pace so all things can work together to achieve needed results.
Credit-10 is an international analytical site that provides information on lending offers and allows users to choose a profitable online loan. Service operates in 15 countries, including Denmark, Norway, Finland, Sweden, South Africa, Mexico, Poland, Romania and Spain.
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