EU website sweep reveals general lack of transparency about consumer credit deals

National regulators collaborated as part of a "sweep" of 562 sites and found that 393 of them did not display information they are required to do so under EU law when offering deals on credit cards, personal loans or other credit arrangements.

"Of the 562 websites originally checked, only 30% passed the sweep test for compliance with the relevant EU consumer rules and 70% of these sites (393) were flagged for further investigation," the Commission said in a statement.

Operators had failed to include information in consumer credit advertising, omitted key details about their offers or been misleading in how they presented costs, the Commission said.

"Advertising on 258 (46% of websites checked) did not include all the standard information required by the Consumer Credit Directive, e.g. the annual percentage rate of charge (APR), which is essential to compare offers, information on whether charges on obligatory ancillary services (e.g. insurance) were included in the total cost, or on the duration of the credit agreement," the Commission said.

"244 (43%) websites did not give clear information about all the different elements of the total cost, e.g. on the type of interest rate, (fixed, variable or both), on the duration of the credit (if applicable), and on some of the costs related to the credit (e.g. an arrangement fee)," it said.

"Misleading presentation of the costs where the cost of the credit is displayed in a way which is false or could deceive consumers" was also apparent on 116 sites. Those sites had either been misleading about how price is calculated or not informed consumers about additional insurance costs they were liable to be charged.

Of the 47 UK consumer credit websites checked, only 9 were said not to have displayed "irregularities" in the information provided on credit deals. All the websites checked in Spain, Cyprus, Malta and Slovakia contained irregularities.

The Commission said authorities in Italy, Estonia, Latvia, Lithuania, Slovakia and Sweden had conducted "deeper" investigations of 57 sites included in the 'sweep' and found "main problems related to pre-contractual information and contract terms".

Under the EU's Consumer Credit Directive organisations must provide consumers with certain information relating to most credit deals they are advertising. The rules do not apply to "secured" credit deals, such as mortgages, credit arrangements for buying land or property or arrangements where the credit on offer amounts to less than €200 or more than €75,000, amongst other exceptions.

Under the Directive organisations are generally required to include information about the borrowing rate for particular credit agreements and the total amount of credit being offered when advertising the deals to consumers. Other information the organisations are also generally required to display includes the APR at which credit must be repaid, whilst any charges that apply must be included in any calculation of a total cost figure consumers are shown

Prior to the finalisation of any credit arrangement organisations are also required to provide consumers with further information, including the type of credit specified in the deal, the identity and address of the creditor and the duration of the deal. Information about the borrowing rate and how it may be subject to change must also be included, as should a "representative example" of how APR will affect individual consumers.

National regulators are to question financial institutions and intermediary credit providers about the "suspected irregularities and ask them to clarify or take corrective action," the Commission said. Organisations that fail to comply could be fined or even ordered to close their sites.

The Commission said it would report on the enforcement action taken when the various authorities report to it on their actions. The Commission has asked them to do so by the autumn.

"When people look for credit they sometimes discover that this credit turns out to be more expensive than it had originally appeared, because important information was sometimes unclear or missing," EU Consumer Commissioner John Dalli said. "Consumer credit is not always easy to understand, which is why there is European legislation in place to help consumers make informed decisions. It is therefore very important that businesses provide consumers with the correct and necessary information. And it is the role of the Commission to work together with national enforcers to make this happen."