Harmonised EU Framework for Consumer Credit May Impact Crowdfunding Platforms

Recently, the European Commission distributed a proposal pertaining to the harmonization of consumer credit. The proposal is being reviewed in light of the advent of the digitization of consumer credit.

To quote the factsheet distributed by the Commission:

“Consumer credit helps consumers finance all sorts of projects and goods. However, if the costs of the credits are excessive, its conditions unclear or its consequences not carefully assessed, the credit becomes a risk. Digitalisation has profoundly changed the lending sector. New market players and new products have appeared on the market. New ways of disclosing information digitally and of assessing the creditworthiness of consumers using automated decision-making systems and non-traditional data need to be addressed. The COVID-19 crisis has had a major impact on the credit market and consumers: a survey in 21 Member States shows that 6 in 10 consumers face financial difficulties since the start of the crisis.”

Peer-to-peer lenders (or marketplace lenders) in the consumer sector, also recognized as crowdfunding platforms, may be impacted by the proposal as these sites have emerged as an option for consumers to receive credit.

According to a statement by EUROCROWD, a Fintech advocacy group, the proposal is viewed as a supplement to the relatively new crowdfunding regulation that will go into effect later this year. To quote EUROCROWD:

“EUROCROWD is welcoming the final step in setting clear guidance to the crowdfunding industry toward a professional service provision with strict consumer protection in mind. The proposal is substantive and complex, throwing up several issues for the crowdfunding sector. It no doubt will lead to significant adjustments in national implementations, as it aims at harmonising the rules to a maximum degree within its scope. The proposal will next be read in the Council and the Parliament.”

While there is no foregone conclusion, the stakeholders are diverse with different objectives. EUROCROWD will be interacting with the Commission and European Parliament to provide insight and perspective from industry providers.

The proposal is embedded below.

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