EU Proposes New Set Of Loan Rules
I think that it is fair to say that the vast majority of people in the UK share the same view when it comes to the European Union introducing new rules and regulations for our country and I’m not about to start ranting about Brussels sticking their noses in to our business…I’ll let you do that for yourselves!
The European Union have proposed new rules which will be applied to all regulated loans in the UK, such as home owner loans and mortgages, which are currently already regulated by the Financial Services Authority (FSA).
Under the new rules, lenders will be required to supply potential borrowers with much simpler and clearer information about the loan they are taking out, including the overall cost and the risks which are associated with the loan.
The newly proposed rules will allow borrowers to repay their loans early, without incurring any penalty and the pre sale information will carry additional risk warnings, including a warning about the possible pitfalls in taking out a loan in a foreign currency.
If, or rather when, the legislation is passed, banks and building societies, as well as financial intermediaries and loan brokers, will have to provide potential borrowers with an information sheet covering all the main points of the loan they are taking out.
This will include the main features of the loan, the repayment methods and options, risk warnings, withdrawal rights and how to complain…a bit like the current Key Facts Illustration which customers currently receive for a regulated loan in the UK!
Whilst the EU is singing the praises of new rules for the UK loan market and how they will stop the practice of irresponsible lending, they have not considered the cost to the loan industry. It is estimated that the proposed changes will cost lenders and loan brokers around £44 million to implement.
So when your loan broker sees you about your next home owner loan and tells you that his fees have gone up, don’t blame him…it’s most likely down to the rules which have been introduced to provide the customer with better advice and offer them more protection!
