The trade body said that the MEP report presented a “radical re-working of the directive” which ffectively seeks complete consumer protection, with measures including scrapping early repayment charges and arrears penalties.
In its News and Views, the CML said: “There is little apparent acknowledgement of the potentially damaging impact the proposals could have on lenders – and ultimately the wider mortgage market and therefore on consumers, too.”
The CML said that the latest plans fly in the face of the directive published in March, which sought a balanced approach to responsibility for both lenders and consumers.
Following the introduction of the directive, two separate European parliament committees were tasked with giving their reactions to the proposals – one overseeing economic and monetary affairs (ECON) and the other internal markets and consumer protection (IMCO).
The IMCO report is expected in September.
However, the recently published ECON report, drafted by the committee’s nominated rapporteur Spanish MEP Antolin Sanchez Presedo, takes the directive in an “entirely unexpected direction”, the CML said.
Suggested measures include:
- Introducing a cooling-off period for borrowers of at least 14 working days after a mortgage offer has been made
- compensation for consumers if credit is rejected because a reference agency supplies an inaccurate report
- the right for borrowers to make overpayments without penalty, and for them to be able to draw down in the future any overpayments they have made
- a ban on arrears charges if payment problems arise that are beyond the control of the borrower.
The CML warned that the proposals could have “widespread, unintended consequences” and their effects have not been fully assessed.
In particular, it said that overhauling over- and underpayments and arrears charges would impose cost and uncertainty on firms, and make mortgages more expensive for borrowers.
The CML said: “We believe that the ECON report takes proposals for European regulation in an unexpected direction, which is inappropriate to the needs of consumers and firms that continue to operate essentially in separate markets.
“As we move into the autumn, we will be working with lenders and other interested parties – in the UK and Europe – to seek to ensure that European regulatory proposals are appropriate to the needs of firms and consumers in different countries.
“We will also be arguing that any new measures should be proportionate and justified by cost-benefit and impact analysis.”
