Consumer Credit Directive 2.0 – More consumer protection, higher regulatory burden? A view from Germany
RegCORE Client Alert | Banking Union | German Regulatory Developments
Directive 2023/2225 on credit agreements for consumers and repealing the Consumer Credit Directive (2008/48/EC) (referred to herein as CCD 2.0)Available here.Show Footnote was published in the Official Journal of the EU on 30 October 2023 and came into force on 19 November 2023. EU Member States must adopt and publish laws, regulations and administrative provisions necessary to comply with CCD 2.0 by 20 November 2025 and CCD 2.0 will apply in full by 20 November 2026. While this might seem far off in 2024, CCD 2.0 sets out wide-reaching reforms and thus numerous changes for financial services firms, in particular creditors, credit intermediaries and their compliance. This applies both to their client-facing documentation as well as their internal systems and controls plus respective policies and procedures.
CCD 2.0 forms part of the European Commission’s “New Consumer Agenda” which aims to update the overall strategic framework of the EU’s consumer policy. The original CCD, when introduced in 2008 focused on the need for lenders to provide appropriate information to consumers to help them make an informed choice when taking out a (consumer) loan. Since then, increasingly digital client distribution channels and increasingly diversified as well as potentially riskier product offerings, including high-cost-short-term credit, prompted the European Commission to commence a comprehensive review of CCD 1.0 which led to CCD 2.0 to replace it and therefore aim to reduce (potential) consumer detriment. CCD 2.0 widens the scope of the existing regime, adapts information requirements to cater for digital devices, improves creditworthiness assessments and addresses certain business practices that potentially exploit consumers.
This Client AlertWhich should be read in conjunction with other coverage from our EU RegCORE notably on ESMA’s supervisory expectations on finfluencers as well as digital distribution practices available here.Show Footnote assesses the impact of CCD 2.0’s reforms, as benchmarked against a number of considerations relevant to firms conducting consumer credit activity in Germany, notably in the context of the German Civil Code (Bürgerliches Gesetzbuch, BGB) and the Introductory Act to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch, EGBGB).
Key changes introduced by CCD 2.0
CCD 2.0 as with its predecessor establishes pan-EU requirements on consumer loan agreements. In Germany these are specified in Section 491(2) BGB. This supplements the EU’s Mortgage Credit Directive (MCD) (itself under review – see standalone coverage from our EU RegCORE on that development) that applies to consumer credit agreements for real estate, which in Germany is specified in Section 491(3) BGB. That approach has been used as a model for parts of the reforms now enshrined on a comprehensively harmonised pan-EU level in CCD 2.0.
Since 2008, digitalisation has profoundly changed the decision-making process and habits of consumers. This includes the emergence of new products and the evolution of consumer behaviour and preferences. There are issues with the content and disclosure of information to consumers and insufficient safeguards to ensure responsible lending. Imprecise wording of certain provisions in CCD 1.0 had enabled Member States to adopt diverging provisions, which has resulted in a highly fragmented regulatory framework across the EU in a number of aspects of consumer credit. In the view of the European Commission, this hindered the potential, especially in the light of digitalisation, for a growing cross-border consumer credit market.
As part of finalising CCD 2.0, the European Commission had an overall aim to extend the scope of the CCD 2.0 to (i) consumer credit agreements under EUR 200, (ii) loans granted for no consideration; (ii) all leasing agreements; (iii) peer-to-peer loans; (iv) limit pre-contractual information to the essentials; (v) prohibit the conclusion of contracts by means of pre-ticked boxes; (vi) introduce conduct of business obligations and interest rate caps; (vii) ensure a more effective enforcement regime and (vii) strengthen debt counselling. Lastly, CCD 1.0, like a number of financial services legislative and regulatory rulemaking instruments, lacked provisions dealing with events of exceptional and systemic economic disruption (such as the one caused by the COVID-19 pandemic).
CCD 2.0 replaces CCD 1.0 but will retain many of its elements. The key changes include:
- Broadening the scope of consumer credit agreements and equally bringing risky loans within scope. CCD 2.0’s scope covers:
- credit agreements under EUR 200;
- credit agreements up to EUR 100,000 (this is increased from EUR75,000 to take account of inflation);
- certain hiring or leasing agreements that have an option to purchase goods or services (for example, motor finance agreements).
- credit agreements in the form of an overdraft facility where the credit has to be repaid within one month;
- credit agreements where (i) the credit is granted free of interest and without any other charges; or (ii) the credit has to be repaid within three months and only insignificant charges are payable. This is intended to catch, for example, certain buy-now-pay-later (BNPL) loans; and
- “crowdfunding credit services” provided to consumers (where “crowdfunding credit services” means services provided by a crowdfunding platform to facilitate the granting of consumer credit). However, facilitating the granting of credit provided to consumers, as defined under the CCD, is excluded from the EU’s Crowdfunding Regulation ((EU) 2020/1503) (see standalone coverage from our EU RegCORE). Instead, CCD 2.0 aims to complement the Crowdfunding Regulation by remedying this exclusion and bringing legal clarity on the applicable legal regime for crowdfunding services when a consumer seeks to take out credit through a crowdfunding credit services provider.The issue of consumer protection in relation to credit provided through crowdfunding platforms is not specifically covered in CCD 2.0, since the European Commission argued that it is not aligned with the underlying aims. The European Commission stated that it will evaluate the protection of consumers who invest through these platforms, as well as the platforms’ obligations towards these customers, in a different context. If deemed necessary, this evaluation may lead to a legislative proposal. (This is in contrast to the credit services supplied to customers through crowdfunding, as mentioned above, which are regulated under CCD 2.0.)Show Footnote
- Adapting information requirements to ensure they cater for digital devices.
- Making information relating to credit offers clearer and avoiding information overload for consumers.
- Addressing practices that exploit consumer behaviour such as product tying and bundling practices, pre-ticked boxes or unsolicited credit sales.
- Improving rules on assessing consumer creditworthiness (that is, consumers’ ability to repay the credit in a sustainable way) to ensure appropriate and proportionate data is used and to prevent over-indebtedness.
- Allowing Member States to cap the cost of credit for consumers.
- Supporting consumers who experience financial difficulties through forbearance measures and debt advice services.
- Introducing requirements for businesses to put consumers’ needs first and act ethically while ensuring that their staff have an appropriate knowledge and competence on.
Where possible, the definitions in Article 3 of CCD 2.0 have been aligned with those in other EU texts, in particular the MCD, as tailored to reflect the CCD 2.0’s specificities. Equally, some of the technical changes to the CCD, such as those relating to creditworthiness assessments and conduct of business requirements, draw on provisions in the MCD.
While the European Commission’s overarching aims have largely been achieved in the text of CCD 2.0, it also had to accept some compromises. For example, the inclusion of credit agreements under EUR 200 was somewhat diluted by granting Member States a national option. The same applies to loans granted without consideration and credits that have to be repaid within three months and only entail insignificant costs. In addition, under a new provision of the directive, the right of withdrawal will expire 12 months and 14 days after the conclusion of the credit agreement, even if the mandatory information in the contract was not provided (Art. 26 (2) CCD 2.0).
The following sections discuss some of the key changes that CCD 2.0 introduces in further detail, including in the German context. Financial services firms may want to take early pre-emptive action on moving to compliance with these new requirements, not only for their business in Germany but also in light of how other national options and discretions may (cease to) apply (differently) in other EU Member States.
Extension of the CCD’s scope of application
Previously, consumer credit agreements that were under EUR 200 and loans that could be repaid within three months with minimal fees were not covered in-scope of relevant protections under German and European consumer credit law (Section 491 (2) nos. 1, 3 BGB, Art. 2 (2), points (c), (f) CCD old edition). The German legislator could also have left loans granted without consideration unregulated under the previous directive (Art. 2 (2), points (e), (f) CCD old version). However, the German legislator decided to introduce special provisions, albeit with a lower intensity of regulation, for such credit agreements (Sections 514, 515 BGB).
The CCD 2.0’s reforms eliminated these exemptions so as to enhance consumer protection, specifically improving protections for those persons that qualify as “economically vulnerable consumers”. Nevertheless, certain “vestiges” of the former exemptions still persist: Under specific circumstances, sellers of goods or services may still be excused from requiring immediate payment if there are only little expenses incurred in the event of non-payment, as stated in Article 2(2), point (h) of CCD 2.0.
Furthermore, under specific circumstances, Member States, in reliance on a national option, may elect to exclude debit cards with delayed payment from the provisions of CCD 2.0, as stated in Art. 2 (5). This is also a remnant of the prior exemption stated in Article 2 (2) point (f) of CCD 1.0. Furthermore, CCD 2.0 grants Member States the option to exempt loans below EUR 200, loans granted without consideration and loans that have to be repaid within three months with little expenses from some terms of CCD 2.0 (as stated in Article 2(8)). An option to keep mandatory information that is to be provided in advertisements, during the pre-contractual phase as well as in the contract itself somewhat more succinct.
CCD 2.0 equally expands the reach to bring leasing contracts into its scope. They are now also protected if they provide the lessee with the opportunity to buy the leased item. In contrast, the exception for loans granted under statutory provisions with a general interest purpose (now Art. 2 (2) point (k) CCD as amended) has been extended; such loans are no longer required to carry an interest rate not exceeding the market rate (Art. 2 (2), point (l) CCD as amended).
Importantly, Arts. 14-17 CCD 2.0 introduce new requirements that extend the application of what is covered and what is prohibited. Art. 14 prohibits tying practices (for example sales of mandatory payment protection insurance (PPI) with credit. This restriction applies unless it can be demonstrated that a tied product results in a clear benefit for consumers, taking due account and the availability and process of the kinds of products in question. In contrast, bundling practices, which concern the offer or sales of credit agreements in a package with other financial products or services where the credit agreements are also made available separately are allowed. Under Art. 15 ancillary services must be provided in a clear and transparent manner. This article also prohibits inferring a consumers agreement for the purchase of ancillary services through default options, pre-ticked boxes, inactivity or silence – as discussed below. Importantly, Art. 16 sets new standards to ensure that where advice is given to a consumer, a consumer is made aware of this and it does not introduce an obligation to provide advice. However, where such advice is given, a sufficient number of credit agreements or providers are considered, such advice is given in line with the borrower’s profile and a fair indication on fees is given. Lastly, Art. 17 extends and harmonises what was previously a fragmented prohibition on any unsolicited sale of credit, including non-requested pre-approved credit cards sent to consumers or consumers’ overdraft or credit card spending limit being raised unilaterally by the creditor, without their prior request or explicit agreement.
Advertisement for consumer credit agreements
Art. 7 of CCD 2.0 introduces new general principles for marketing and advertising communications. All advertising and marketing communications must be fair, clear and not misleading. Wording in such communications that may create false expectations for a consumer regarding the availability or the cost of credit will be prohibited.
Art. 8 CCD 2.0 sets out the form and content of information to include in advertising and is similar to Art. 4 of the CCD. The standard information concerns key credit features and should be easily legible, or clearly audible, as appropriate, and adapted to the technical constraints of the medium used for advertising. In specific and justified cases where the medium used to communicate the information to include in advertising does not enable its visual display, such as in radio advertising, such information should be reduced to avoid information overload and reduce unnecessary burden.
Arts. 7 and 8 CCD 2.0 complement obligations relating to providing information in the Distance Marketing of Consumer Financial Services Directive (2002/65/EC) (DMD) and the Unfair Commercial Practices Directive (2005/29/EC) (UCPD) – both of which are assessed in standalone coverage available from our EU RegCORE.
Art. 9 CCD 2.0 sets a new requirement that clear and comprehensible general information about credit agreements is made available by creditors or, where applicable, by credit intermediaries at all times.
In future, advertisements must contain the warning: “Caution! Borrowing costs money!” or an equivalent wording (Art. 8 (1)).The effects of the new requirements on the credit market will only become apparent in practice. It is to be hoped that the prescribed warning will not have to be reworded as: "Caution, borrowing money costs money – and more and more thanks to the increasing regulatory burden!"Show Footnote The standard information to be provided in advertisements has remained substantially unchanged from what was contained in CCD 1.0. However, the rules on how that standard information is to be provided have been revised in view of the limitations of the respective (in particular: digital) advertisement media (see, e.g., at the beginning and the end of Art. 8 (3) as amended in CCD 2.0).
Under the new regulatory framework, Member States must also prohibit certain advertising claims. This applies, for example, to the statement that a credit would improve the consumer's financial situation or that existing credit would have little or no influence on the assessment of a credit application (Art. 8 (7)). Member States may also prohibit certain other advertising practices at their discretion, such as emphasising the ease or speed with which a credit can be obtained or advertising discounts that are conditional upon taking up a credit (Art. 8 (8)).
General information about credit agreements offered
CCD 2.0 introduces a new information obligation. In addition to the standard information already required in advertisements, the pre-contractual information and the respective explanations thereto as well as the mandatory information to be included in the contract (Art. 4, 5, 10 CCD old version; Art. 8 (3)-(4), Art. 10-12, 21 CCD 2.0), general information about the credit agreements offered to consumers must be provided under the new regulatory framework (Art. 9 CCD 2.0). Such general information was required only within the scope of Art. 13 MCD (in Germany, in Art. 247a § 1 EGBGB) and – based upon the German legislator’s own decision – for overdrafts and overrunnings (i.e., implicitly tolerated overdrafts) under Art. 247a § 2 EGBGB.
Equally, Art. 5 CCD 2.0 sets out an obligation to provide consumers with information that is required under the CCD 2.0 free of charge. Whilst this requirement was required under CCD 1.0, there was until now no specific article addressing that requirement.
Mandatory pre-contractual information (PCI)
CCD 2.0 also amends rules on PCI to ensure it is provided to consumers in a more effective way. Creditors or credit intermediaries have to provide consumers with personalised PCI on the basis of the Standard European Consumer Credit Information (SECCI) form that was introduced in CCD 1.0.
Prior to the customer being legally obligated by any credit agreement, PCI must be furnished at least one day in advance. If PCI is given to the consumer less than 24 hours before they are legally bound by a credit agreement or an offer, the creditors or credit intermediaries are required to remind the consumers, one to seven days after the contract is finalised, about their right to withdraw from the credit agreement.
The structure of the PCI has also been modified. The European Commission originally wanted to introduce a new brief fact sheet with six particularly important items of information, including the total amount of credit, the term and the annual percentage rate of charge. It was intended to provide consumers with the essential information in a form suitable for a mobile phone display. However, in the legislative proceeding leading to the finalisation of CCD 2.0, it was decided not to introduce a new fact sheet but to instead reorganise the SECCI. Some particularly important information is now to be found upfront on one or at most two pages (Art. 10 (3)-(4) CCD 2.0).
The content of the mandatory information has been slightly expanded. New additions include, for example, further contact information of the lender and, if applicable, the credit intermediary, information on any individualised pricing based on automated data processing, as well as a warning and an explanation of the legal and financial consequences of non-compliance with other obligations (besides effectuating payments as they become due) under the credit agreement (Art. 10 (3), point (l), Art. 10 (5), points (m), (p) CCD 2.0).
Stricter requirements for creditworthiness assessments
CCD 1.0 introduced strict rules (Art. 8) on lenders assessing a consumer’s creditworthiness before concluding a consumer credit agreement. According to transposition in Germany, a general consumer loan agreement may only be concluded if there is no significant doubt that the borrower will meet its obligations. In the case of consumer mortgage credit, an even higher requirement applies to the creditworthiness assessment. In such instances, it must be probable that the borrower will perform in accordance with the contract (section 505a (1) clause 2 BGB, for both general consumer credits and consumer mortgage credits). These higher requirements for mortgage credits are based on Art. 18 (5) (a) MCD.
Following this example, CCD 2.0 is stricter and consequently a creditworthiness assessment will also have to lead to the conclusion that the consumer is likely to perform in accordance with the contract in the case of general consumer credit agreements (Art. 18 (6) CCD 2.0). In addition, Art 18(1) CCD 2.0 requires a “thorough assessment of the consumer’s creditworthiness” and thus a higher standard than under the previous rule that previously required an assessment of creditworthiness based on “sufficient information” (Art. 8 (1) clause 1 CCD 1.0). The European Commission’s evaluation of CCD 1.0 found that Member States varied significantly in their interpretation of art. 8 CCD 1.0 and Art. 18 CCD 2.0 expands Art. 8’s requirements so that the creditor must assess the consumer’s ability to repay the credit.
The creditworthiness assessment must take into account the consumer’s interest and only be based on necessary and proportionate information on the consumer’s income and expenses and other financial and economic circumstances. The personal data collected to assess creditworthiness should not exceed what is strictly needed to perform such an assessment and should take into account the EU’s General Data Protection Regulation (EU) 2016/679) (GDPR) principles (in particular, the principles of data minimisation, accuracy and storage limitation).Recital 55 to CCD 2.0, refers to the EBA Guidelines on loan origination and monitoring (EBA/GL/2020/06) as providing guidance on what categories of data may be used for the processing of personal data for creditworthiness purposes. See coverage from our EU RegCORE on the EBA Guidelines and reforms.Show Footnote
CCD 2.0 requires that credit is made available to consumers only where the result of the creditworthiness assessment indicates that the obligations resulting from the credit agreement are likely to be met in the manner required under that agreement.
Under the new standards in CCD 2.0, when the creditworthiness assessment is based on automated processing, including profiling, a consumer has the right to request and obtain human intervention on the part of the creditor, a meaningful explanation of the assessment of creditworthiness, and express their point of view and to contest the creditworthiness assessment. These provisions supplement the applicable data protection requirements (e.g., under Art. 22 GDPR, see currently Court of Justice of the EU (ECJ) judgment of 7 December 2023 - Case C-634/21).
Another new feature of CCD 2.0 is its clarification that the creditworthiness assessment is carried out in the interests of the consumer in order to prevent irresponsible lending practices and over-indebtedness (Art. 18 (1) clause 2 CCD 2.0). This clarification implements EU case law established in the ECJ judgment of 27 March 2014 - C-565/12).
Art. 19 CCD 2.0 introduces provisions to ensure that creditors are able to access information from relevant databases on a non-discriminatory basis. This obligation already exists for credit agreement providers and is also extended to apply to both public and private databases.
Responsible lending requirements
A further reform that also complements the above is that CCD 2.0 establishes further “responsible lending requirements”, following, in part, the model of the MCD. These include, e.g., the obligation to act honestly, fairly, transparently and professionally and take account of the rights and interests of the consumers, as well as the related requirements regarding the remuneration, knowledge and skills of creditors’ and credit intermediaries’ employees (Art. 32, 33 CCD 2.0).
In other areas, CCD 2.0 goes beyond the MCD, one example being the Member States’ obligation to protect consumers against abusive lending practices and excessively high borrowing rates, annual percentage rates of charge or total costs of credit by means of caps or other measures (Art. 31 CCD 2.0). The same applies to the ban on unsolicited granting of credit (Art. 17 CCD 2.0), as may occur, e.g., with respect to overdraft facilities, credit cards or the expansion of credit limits.
Importantly, Art. 30 CCD 2.0 addresses the annual percentage rate of charge (APRC), the principal consumer credit product comparison indication. It requires consumer credit products to use the CCD APRC definition. The APRC calculation method is described in Annex III to CCD 2.0, along with mechanisms for updating it to account for market changes. Moreover, Art. 31 introduces restrictions on consumer credit agreement interest rates, the APRC, and credit costs. CCD 2.0 harmonises this point, even though is common practice in a number of Member States. Member States also have a national option to set specific caps for revolving credit facilities such as credit cards.
Surprisingly broad: the new discrimination prohibition
Art. 6 CCD 2.0 introduces new rules on non-discrimination of consumers that aim to ensure more of a level-playing field in the EU consumer credit market. It requires Member States to ensure that consumers legally resident in the EU are not discriminated against on grounds of their nationality, residence or on any ground referred to in Article 21 of the Charter of Fundamental Rights of the EU when requesting, concluding or holding a credit agreement in the EU.
Disputes are certainly foreseeable in whether Art. 6 has been complied with. In Germany, the issue of a possible age discrimination in creditworthiness assessments has been discussed at length. Similarly, there is already case law with respect to credit applications by potentially unconstitutional political parties and their functionaries. What is completely new is the idea of property being a prohibited ground of discrimination in the granting of credit. However, differentiations that are “duly justified by objective criteria” remain permissible (Art. 6 second subparagraph CCD 2.0). However, the ECJ and the national courts will likely have to clarify what that means in detail.
Contract conclusion, contract amendment, and the role of supervision authorities
CCD 2.0 contains a new provision to limit a consumer from initiating or accepting a credit arrangement though an automatic selection, such as pre-ticked checkbox. This also applies to agreements for ancillary service (Art. 15 CCD 2.0). The list of mandatory information that must be included in a contract has been revised and supplemented at specific points (notably Art. 21(1) CCD 2.0 at points (p), (q), (s) and (x)).
While the CCD 2.0 does not modify how contracts may be formed and concluded, it does introduce new rules that apply to contractual amendments. CCD 2.0 in-scope agreements are now subject to the same formal requirements as the original contract. Member States shall require that credit agreements and any modifications of such agreements are drawn up on paper or another durable medium. While this principle is comparably new as a pan-EU wide legal requirement, it reflects a position already recognised under German law (see BGH judgment of 6 December 2005 – XI ZR 139/05 concerning Section 492(1) BGB).
From both an EU and a German law perspective Art. 22 CCD 2.0’s new, comparably stricter obligation to provide information on contract amendments, extends traditional consumer and contractual law principles when it comes to how to make amendments. The CCD 2.0 requires that a consumer must be informed about proposed contractual amendments and the relevant timeframe. However, the CCD 2.0’s obligation to provide additional information on existing possibilities to complain about proposed contractual amendments, including the name and address of the respective competent authority (Art. 22 points (c)-(e) CCD 2.0) may add new complexity, in particular for certain cross-border situations.
Overdraft and overrunning
Under CCD 1.0, short-term overdrafts that were repayable within one month were excluded from the CCD’s scope. Equally, only some provisions of the CCD applied to overdrafts that were due on demand or within three months. Overdrafts were subject to specific requirements on pre-contractual information, mandatory disclosures in the contract as well as those to be included a separate information sheet. Under CCD 2.0, these exemptions and special provisions cease to apply. The general provisions of CCD 2.0 including the SECCI form therefore also apply to overdrafts. Furthermore, while the requirement to provide certain specified information to consumers on a regulate basis in account statements has remained largely unchanged, Article 24 has been amended with minor additions and clarifications.
In relation to overrunning, i.e., limited tolerated overdrafts, only some of the CCD’s articles continue to apply. Member States may exercise a national option to require creditworthiness checks on such overrunning.
Despite the above, the information to be provided in the contract and then regularly after conclusion of the contract and in the event of a significant overrunning for more than one month has essentially remained the same in CCD 2.0. This also applies to Member States’ national option regarding the mandatory offer of a different credit product to the consumer in the event of a significant overdraft (Art. 25 (3) CCD 2.0). In case of regular overrunning, advisory services must be offered to the customer, where available, and he or she must be referred to debt counselling free of charge (Art. 25 (2) third subparagraph CCD 2.0).
For both overrunnings and overdrafts, there is a new obligation to inform the consumer at least 30 days before a termination or reduction takes effect and to give the consumer the opportunity to repay the due amount in twelve equal monthly installments at the contractual interest rate (Art. 24 (3-4), 25 (4-5) CCD 2.0). To a certain extent, member states may still regulate both overdrafts and overrunnings more strictly than provided for in the revised CCD.
Cooling off period, withdrawal rights and early repayment
Regarding the right of withdrawal, a notable and distinct change has been introduced by way of Article 26 (2) CCD 2.0. Consumers still have a 14 days “cooling off” period in which to be able to exercise a right of withdrawal. Under previous rules, consumers had a perpetual right of cancellation in the event of incorrect information in the contractual documentation. However, under CCD 2.0, that perpetual cooling off period now expires within 12 months and 14 days after the contract is concluded, regardless of whether the consumer has received the contract and the required information as specified in Arts. 20, 21 CCD 2.0. However, this is only applicable if the consumer has been adequately informed about their right to withdraw, as stated in Article 21 (1), first subparagraph, point (p) of CCD 2.0.
Regrettably, CCD 2.0 fails to establish the specific guidelines for determining the prepayment compensation as outlined in Article 29 CCD 2.0. The mandatory information to be included in the contract has been changed accordingly. According to the updated regulations, the credit agreement must provide a clear and easily understandable explanation of how the prepayment compensation is calculated (as stated in Article 21 (1) point (s) CCD 2.0, and also mentioned in recital 70). The inclusion of this new clause is derived from the decision made by the ECJ in its ruling of 9 September 2021, C-33/20.
If the client repays the loan early, the client has the right to a proportional decrease in the overall loan cost. Similarly, CCD 2.0’s text was adjusted to consider an ECJ ruling from 11 September 2019, C-383/18 on this point. Moreover, CCD 2.0 clarifies that a pro rata reduction also applies to fees that are not dependent on the duration of the term, as stated in Article 29 (1) clause 3 and recital 70 of 2.0.
In addition to the points mentioned above, CCD 2.0 introduces comprehensive changes that can only be briefly outlined here. For example, additional advisory services, greater availability of financial education for consumers and additional standards on the application forbearance measures in the event of payment arrears (Art. 14, 16, 34, 35 CCD 2.0) are based on the approach used in the MCD, but still do go beyond those requirements in some respects. Moreover, the provisions on credit intermediaries (Art. 37, 38 CCD 2.0) have parallels to the requirements in the MCD, even if there are considerable differences in detail. In contrast, the regulation on debt advisory services in Art. 36 of the CCD 2.0 is new. Firms will want to take account on how to comply with both newly revised requirements and whether there are any lessons learned.
Impact on financial services firms
CCD 2.0 will have a significant impact on financial services firms i.e., creditors as well as credit intermediaries when offering consumer credit products or services in the EU. They will have to likely:
- Reflect the extended scope of the CCD 2.0 and its application to BNPL, short-term high-cost credit and overdraft facilities, which were previously excluded or subject to divergent national rules. This will require financial services firms to comply with the same information, assessment and conduct requirements for these products as for other types of consumer credit, and to adapt their business models accordingly;
- Review and revise their advertising and marketing practices to ensure they are clear, fair and not misleading and provide the standardised information required by CCD 2.0, the borrowing rate, the total amount of credit, the APRC and duration of the credit agreement. This also includes providing adequate explanations to consumers about the proposed credit agreements and any ancillary services, taking into account the consumer's needs, financial situation, and personal circumstances, and the specific effects and risks of the credit products;
- Review and update their credit agreements, advertisements, (personalised) PCI, and general information to comply with the new and revised information requirements and disclosures, including greater and more frequent use of the SECCI as well as the new rules on product tying, bundling, and unsolicited credit sales;
- Ensure, where applicable, that credit agreements referencing a “benchmark”, as defined in the EU’s Benchmarks Regulation, indicate the name, the administrator and the potential implications of that benchmark for the consumer;
- Implement more rigorous and thorough creditworthiness assessments, based on necessary and proportionate data, and ensure that consumers have the right to human intervention, explanation, and contestation when automated processing is used;
- Enhance compliance with relevant conduct of business standards and adopt responsible lending practices that put consumers' needs first, act ethically, and prevent over-indebtedness, as well as comply with any national caps or measures on the cost of credit, the APRC, or the total cost of credit;
- Train their staff to have appropriate knowledge and competence on consumer credit products and services, and to provide adequate explanations and advice to consumers;
- Deal proactively with emerging credit risk and exercise reasonable forbearance before initiating enforcement proceedings, and refer consumers facing financial difficulties to easily accessible debt advisory services;
- Inform consumers of the possibility and methods of accessing out-of-court dispute resolution procedures for the settlement of disputes concerning credit agreements, and cooperate with the entities performing such procedures; and
- Monitor and report on their compliance with the CCD 2.0 rules and cooperate with the competent authorities, as well as handle any complaints or disputes from consumers in a fair and timely manner.
The reforms that CCD 2.0 rolls out on a pan-EU-27 basis will also enhance the consumer's rights and remedies in relation to credit agreements, such as the right to request a human assessment of the credit decision, the right to plead any defence against the assignee of the credit and the right to access out-of-court dispute resolution mechanisms. Moreover, the reforms will impose stricter limits on the charges and fees that financial services firms can impose on consumers in the event of default or modification of the credit agreement and will require creditors to exercise reasonable forbearance measures before initiating enforcement proceedings.
The comprehensive revision of CCD 2.0 will likely pose a number of challenges for in-scope firms operating in Germany but also across the EU-27. Early preparation, allowing them to stay ahead of the curve on their consumer credit documentation and compliance with these new rules and supervisory expectations related to them will be crucial ahead of the 2026 deadline.
While the breadth of change may be present problems in the short term, the CCD 2.0’s increased harmonisation of rules, and partial elimination of certain fragmented exemptions and the streamlining of what are now comparably more limited choices for Member States in national options and discretions creates a much more level playing field. This may lower the overall cost of compliance over the longer-term.
Ultimately, CCD 2.0’s text streamlines and further harmonises how the consumer credit chapter of the EU’s Single Rulebook is applied across the entirety of the EU’s Single Market for financial services. Such streamlining and harmonisation should be welcome by financial services firms in how the can manage their consumer credit offering on a pan-EU-27 basis and those that prepare early may lower their legal and regulatory risks and ensure their consumer credit business is not the subject of unwarranted supervisory scrutiny.
PwC Legal is assisting a number of financial services firms and market participants in forward planning for changes stemming from relevant related developments. We have assembled a multi-disciplinary and multijurisdictional team of sector experts to support clients navigate challenges and seize opportunities as well as to proactively engage with their market stakeholders and regulators. Specifically, this includes PwC Legal’s Financial Services Sector Group and the German Litigation and Arbitration Practice Group assisting banks and other regulated financial services firms in the defence of collection and mass actions, including using state of the art LegalTech solutions. In particular, the German Litigation and Arbitration Practice Group has extensive practical experience with the collective redress instrument already provided for under German law – the model action for a declaratory judgment (Musterfeststellungsklage). The same applies to the defence of representative actions under the Injunctive Relief Act (Unterlassungsklagengesetz, UKlaG).
Moreover, we have developed a number of RegTech and SupTech tools for supervised firms, including PwC Legal’s Rule Scanner tool, backed by a trusted set of managed solutions from PwC Legal Business Solutions, allowing for horizon scanning and risk mapping of all legislative and regulatory developments as well as sanctions and fines from more than 1,500 legislative and regulatory policymakers and other industry voices in over 170 jurisdictions impacting financial services firms and their business.
Additionally, in leveraging our Rule Scanner technology, we offer a further solution for clients to digitise financial services firms’ relevant internal policies and procedures, create a comprehensive documentation inventory with an established documentation hierarchy and embedded glossary that has version control over a defined backward plus forward looking timeline to be able to ensure changes in one policy are carried through over to other policy and procedure documents, critical path dependencies are mapped and legislative and regulatory developments are flagged where these may require actions to be taken in such policies and procedures.
If you would like to discuss any of the developments mentioned above, or how they may affect your business more generally, please contact any of our key contacts or PwC Legal’s RegCORE Team via firstname.lastname@example.org or our website.