Bloody stupid loan rule from the EU!

EU loan rule changes mean only 51% will get cheaper rates

I’m fuming about EU loan rule changes, they’re massively to consumer’s detriment and could easily have been avoided. In the UK almost every lender advertises ‘typical rate’ loans (e.g. 7.2% typical) meaning 66% of accepted applicants must get it, but from 1 Feb new rules mean we’ll use ‘representative rate’ which means only 51% need get it, so people will have less chance of getting cheap rates.

Now I’m no Euro-phobe Brussels basher, but this is a bonkers rule that has been terribly implemented and shouldn’t have happened. It’s a classic case of killing good rules to improve bad ones.

It’s been brought in I believe (I’ve not researched it) to promote a cross-border EU wide credit market, with equal protection for each country. Though how many people actually go cross border to borrow (especially for non-Euro zone countries where it’d involve a currency risk too) I don’t know.

Two words could’ve stopped this

The problem is here in the UK we were ahead of the game asking for 66%, and instead of the rule saying (to paraphrase) “countries’ laws must mandate at least a 51% rate” it said “countries’ laws must mandate a 51% rate” so our rules have had to be dropped to the lowest common denominator.

This is just plain stupid. We already have a nightmare situation as it’s only by applying for a loan you get to know the interest rate you’ll be given, even though all applications also hit your credit score and thus diminishes your ability to compare the market (this is something we managed to get a treasury select committee credit score investigation on). This whole thing makes it worse.

Admittedly there are some other good things in the totality of the package, including new rules that mean loan companies (for loans taken out after 1 Feb) will have to allow partial overpayments rather than the current full ones. Yet all the good is wiped out for me by this one bit of silliness.

The strange thing is expect to see loan advertised loan rates drop because of this, though in reality it’ll be because less people get the headline rate, and more pay above it.

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