Empowering consumers: the impact of the new EU Consumer Credit Directive 2023/2225

The recent adoption of the EU Consumer Credit Directive 2023/2225 lays the foundations for a safer and more transparent consumer credit environment. From extending the scope of credit agreements to stricter advertising rules and improved pre-contractual information requirements, the directive proposes a comprehensive package of measures. Our experts have summarised for you the main provisions and implications!

The new directive (EU) 2023/2225 on credit agreements for consumers of 18 October 2023 (the “Directive”) repeals and replaces the existing credit consumer directive of 2008 (the Directive 2008/48/EC). The Directive aim is to enhance the consumer protection by modernizing the current applicable legal framework as the consumer credit market has significantly evolved, notably regarding the digitalisation of consumer credit services, new consumer habits and the appearance of new market players and products.

The main provisions newly introduced by the Directive relate to the following:

Scope

The Directive has an extended scope of application and is now covering credit agreements up to €100,000 (including credit agreements below €200 which were excluded before) and includes additional types of loans as:

• credit agreements in the form of an overdraft facility and where the credit has to be repaid within one month
• deferred payments, provided that it is granted by a third party, (and not by a supplier of goods or services contracting with the consumer) such as in ‘buy now, pay later’ schemes, offering credit for the good or service
• unsecured loans involving a total amount of more than EUR 100,000, where the purpose of the credit is the renovation of a residential immovable property
• hiring or leasing agreements with an option to buy.

Advertisement

The rules on advertising are stricter, as they must include a clear and prominent warning to make consumers aware that borrowing costs money. In addition, certain advertisements are now prohibited, such as those encouraging consumers to take out loans by suggesting that this would improve their financial situation.

Pre-contractual information

Pre-contractual key information, such as borrowing rates and costs, annual percentage rate of charge, total amount of credit and duration of the credit must now be stated in a prominent way.

Withdrawal right

The Directive also gives the consumer the right to terminate a credit agreement within 14 days. In the event that the consumer does not receive contractual terms and conditions, the withdrawal period will expire 12 months and 14 days after the conclusion of the credit agreement.

Creditworthiness assessment

Before concluding a credit agreement, the creditor must make a thorough assessment of the consumer’s creditworthiness, in the consumer’s interest, to prevent irresponsible lending practices and over-indebtedness.

The Directive also provides that credit should only be made available to the consumer 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.

Prohibition of certain practices

Tying practices, unsolicited credit sales, default options such as pre-ticked boxes are prohibited.

Caps on charges

The Directive requires Member States to introduce measures to ensure that consumers cannot be charged with excessively high borrowing rates, annual percentage rates of charge or total costs of credit to the consumer, such as caps.

Transitional provisions

The Directive 2008/48/EC will continue to apply to credit agreements existing on 26 November 2026 until their termination.

Transposition

Member States shall adopt by 20 November 2025, the laws, regulations and administrative provisions necessary to comply with the Directive and shall apply those measures from 20 November 2026.

Next steps

The ABBL is currently reviewing the provisions of the Directive with its members in the perspective of its transposition into Luxembourg law.

Jonathan Hug, Senior Legal Adviser at the ABBL and Simone Kayser, Senior Adviser – Retail Banking at the ABBL