Consumer Protection and Financial Contracts


This chapter explores the potential impact of fundamental rights on financial consumer contracts, with a special focus on credit agreements. As we have seen in previous chapters, constitutional and fundamental rights play an increasing role in private law in several Member States.[1]

With the legally binding Charter, the influence of fundamental rights in contractual relationships can be expected to increase. This raises questions on how fundamental rights may affect consumer law, in particular in the area of financial agreements, where the complexity of the market renders informed choice more difficult, and where contracts may have important long-term effects on an individual’s welfare.[2]

In Chapter 2, we have seen that EU consumer protection is informed by a market-making perspective, and is focused on full harmonization. This tendency has become particularly visible in contract law and also surfaces in the new directive on credit agreements for consumers from 2008. Although this directive improves the information provided to consumers, there are still doubts on whether this is sufficiently effective in addressing interrelated challenges such as rising over-indebtedness[3] as well as financial exclusion.[4] Market studies have demonstrated that consumers often lack financial understanding and adequate assessment of future risks,[5] which in turn raises a number of questions regarding the prevention of unsustainable lending practices, and on how to improve consumers’ financial capability.[6]

It is argued here that the EU should focus on a coherent approach in relation to consumer credit inspired by a capability approach, promoting information, responsible lending, and inclusive instruments, which are prerequisites for a long-term sustainable market.

The section below starts by exploring consumer protection in financial services, focusing on consumer credit regulation, tracing its evolution and illustrating its emphasis on information and responsible credit. The following section then examines the potential role of fundamental rights in protecting weaker parties in contractual relationships and in promoting specific principles in financial agreements. Finally, the last section explores mechanisms that enhance the consumers’ understanding of financial issues and assesses approaches that may help to address over-indebtedness, such as social lending schemes and special bankruptcy rules.

  • [1] See comparative studies on this topic: G. Bruggemeier, A. Colombi Ciacchi, & G. Comande(eds), Fundamental Rights and Private Law in the European Union (Cambridge: CUP, 2010); C.Busch and H. Schulte-Nolke (eds), EU Compendium—Fundamental Rights and Private Law:A Practical Tool for Judges (Munich: Sellier, 2010); C. Mak, Fundamental Rights in European ContractLaw: A Comparison of the Impact of Fundamental Rights on Contractual Relationships in Germany, theNetherlands, Italy and England, vol. 12 (Alphen aan den Rijn: Kluwer Law, 2008).
  • [2] O. Cherednychenko, Fundamental Rights, Contract Law and the Protection of the Weaker Party:A Comparative Analysis of the Constitutionalisation of Contract Law, with Emphasis on Risky FinancialTransactions (Munich: Sellier, European Law Publisher, 2007).
  • [3] M. Westphal, ‘The EU Financial Service Policy and its Effect on Consumer Law’ , in M.Kelly-Louw, J. Nehf, & P. Rott (eds), The Future of Consumer Credit Regulation, Creative Approaches toEmerging Problems (Markets and the Law) (Aldershot: Ashgate Publishing, 2008), pp. 69-90.
  • [4] Opinion of the European Economic and Social Committee on the Proposal for a Directive concerning credit for consumers, COM(2002) 443 final—2002/0222 (COD), INT/159, 17 July 2003.
  • [5] See J. Leskinen & A. Raijas, ‘Consumer Financial Capability—a Life Cycle Approach’ , inEuropean Credit Research Institute, Consumer Financial Capability: Empowering European Consumers(Brussels: ECRI, 2006), pp. 8-9.
  • [6] See for example: OECD/INFE, High-level Principles on National Strategies for FinancialEducation (Paris 2012).
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