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12 7.12.2023 Catherine Formosa & Kelly Cini Catherine Formosa is a Senior Associate and Kelly Cini is a Trainee Advocate, both within Ganado Advocates' Banking & Finance Team. NEWS The Consumer Credit Directive revamped - Part 1 P ersonal loans and overdras, credit cards and short-term credit prod- ucts are amongst the commonest consumer lending products offered by banks and financial institutions to satisfy a variety of consumer needs. ese products need to be distin- guished from home loans (typically se- cured by hypothecs over immovable property) and which are the subject of a different, albeit complementary regu- lation. Consumer credit regulation also may however also impact other "non- bank" lenders (or creditors) such as merchants or businesses offering their customers deferred payments options for goods and services. On the 9 October 2023, the European Council adopted the revised Consumer Credit Directive ("CCD II" or the "Re- vised Directive") which forms part of the European Commission's 'New Consum- er Agenda'. CCD II supersedes Directive 2008/48/EC ("CCD I") implemented a decade and a half ago across the EU. CCD I had been transposed into Mal- tese law in 2010 by the Consumer Cred- it Regulations, Subsidiary Legislation 378.12. ese will now need to be replaced by a new set of local regulations to reflect the Revised Directive. e European Union's recent endeavours to update the current framework were necessi- tated primarily by the need to adapt to digitalisation challenges in the consum- er credit market and to remedy certain shortcomings in the current regulation in so far as protecting against irrespon- sible consumer lending. is two-part article will consider some of the salient aspects of the Re- vised Directive. A wider scope of application It is evident that lenders will be re- quired to reassess which of their prod- ucts fall within the Revised Directive and to prepare for the relative implica- tions since CCD II has a wider scope of application. In terms of value, the cur- rent framework is limited to consum- er credit agreements ranging between €200 and €75,000. In the Revised Directive, while the €200 minimum threshold has been re- moved the maximum value has been in- creased to €100,000. Unsecured loans of more than €100,00, where the purpose of the credit is the renovation of a resi- dential immovable property are howev- er captured by the Revised Directive. Credit agreements in the form of an overdraft facility to be repaid within one month have also been brought within the purview of CCD II. Moreover, it is significant that hiring or leasing agreements with an express option to buy and certain "buy now pay later" ("BNPL") credit contracts tradi- tionally exempted from regulation have been brought into the fold. On the guise that these BNPL prod- ucts may lead to high costs in the event of late payments or promote hasty un- informed decisions from consumers considering the ease with which these contracts are entered into, the legisla- tor significantly revamped the current BNPL exemption. For an agreement to fall outside the CDD, sellers will have to offer BNPL products without the intervention of a third party, the deferred payment must be totally free of charge and the repay- ment deadline cannot be longer than 50 days, 14 days for large online suppliers. Otherwise, the deferred payment ar- rangement will be considered as con- sumer credit, although a light touch regime is contemplated, and certain ob- ligations may be disapplied. In this regard, it is noteworthy that cer- tain merchants or businesses which may qualify as creditors under CCD II (oth- er than banks and financial institutions) will find themselves subject to a new admission, registration and supervision regime which Member States will be re- quired to put in place, although certain exemptions are being contemplated. Additional Rules Regarding Pre- Contractual Information Significantly CCD II reinforces the rules relating to the provision of pre-con- tractual information. Amongst other things, the Revised Directive divides the precontractual information which the creditor is bound to provide consumers into two – prescribed key information which must be exhibited prominently in the first part of the Standard European Consumer Credit Information form (the so-called "SECCI form"), and preferably on one page (two pages at most), and other information which must follow in a clearly delineated manner. Creditors must also ensure that the information is tailored to the techno- logical mediums through which it will be digested by the consumer, including mobile phone screens. Changes to cred- itors documentation and systems will be necessary to ensure compliance. Creditworthiness Assessments e Revised Directive regulates more stringently the quality of creditworthi- ness assessments aiming to combat the risk of mis-selling and potential over-in- debtedness. While deviations may be made in cer- tain circumstances such as in case of loans for medical expenses, creditors are now expressly prohibited from lending money to consumers if the creditwor- thiness assessment shows that the con- sumer is unlikely to meet his obligations. Information on consumers can be ob- tained from a variety of sources, includ- ing from the consumer himself and from databases, although such information must be appropriately verified by the creditor. Information should include at least the income and expenses of the consumer but should not include special catego- ries of personal data such as health data including cancer data, nor information obtained from social networks. Considering the increased use of pro- filing and other automated processing of personal data, the consumer is being given new rights including the right to request an explanation of the assess- ment, to express his own views and to request a review of the assessment and the relevant decision. e second part of this article will delve into other aspects of CCD II including forbearance and measures against costly lending. A broader scope of application, stricter rules on the creditworthiness assessment, tighter advertising and measures against costly lending are amongst the salient aspects of the Revised Directive

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