Under the Directive proposals, borrowers whose applications have been rejected will be entitled to an explanation by the lender.
Alison Beech, business relationship director at Spicerhaart, said that, while this will ensure fairness, the manual intervention will increase overhead costs.
She said: “Given that the Directive states that the delivery of the explanation must be at no direct cost to the borrower, the cost will have to be borne elsewhere, potentially penalising all borrowers via an increase in rates.”
Beech warned that the proposals could also see borrowers face more confusion with the EC Directive proposing to replace the KFI with an EU-wide European Standardised Information Sheet (ESIS).
She said: “The KFI is already lengthy and, if the ESIS demands even more detailed information, it is doubtful that it will make things any clearer for borrowers.”
Nevertheless, Beech said that, with the UK’s robust regulations, the Directive may have little impact here compared to other countries in Europe.
She said: “For example, proposed changes to ensure that the wording of advertising does not create false expectations are already covered by UK law. More onerous requirements run the risk of making consumer adverts more, rather than less, confusing.”
