It’s notable that the Mortgage Credit Directive has used an even more approach that 
is prescriptive information collection for the purposes associated with consumer’s creditworthiness assessment before concluding a home loan agreement. This directive specifies that such an evaluation must be performed “on the cornerstone of data in the income that is consumer’s costs along with other economic and financial circumstances which can be necessary, adequate and proportionate.” Footnote 37 The directive additionally calls for that the creditor obtains information that is such appropriate external or internal sources, such as the customer, and including information supplied into the credit intermediary or appointed agent through the credit application process,” and it properly verifies these records. Footnote 38 furthermore, these needs are further specified into the directions regarding the European Banking Authority (EBA) (European Banking Authority 2015b).
Judging the consumer’s creditworthiness.
As has been confirmed above, accountable financing can simply be guaranteed in the event that creditor does not just conduct a creditor-focused evaluation, but additionally the borrower-focused test. The second underlines a possible conflict of passions between creditors and customer borrowers, specially when it comes down to high-cost credit. While the above analysis regarding the reckless financing methods in the cash advance and bank card areas has revealed, creditors can participate in a period of expanding credit and creating benefit from customers whom spend interest and penalty fees at an adequate degree to help make the loan rewarding no matter whether it really is ultimately paid back.
The adopted solutions vary greatly across the EU as a result.
Nevertheless, the wording of Article 8 associated with credit rating Directive does not make clear what sort of creditworthiness test – creditor-focused or that is borrower-focused envisaged by it. The UK, as an example, has clearly chosen a borrower-focused test (Financial Conduct Authority 2017a). The customer Credit Sourcebook presently in effect clearly requires that, to make the creditworthiness evaluation, economic businesses “take under consideration a lot more than evaluating the customer’s ability to settle the credit” Footnote 39 and simply just take reasonable actions “to measure the customer’s ability to satisfy repayments under a regulated credit contract in a sustainable way without having the consumer incurring financial hardships or experiencing significant negative effects.” Footnote 40 likewise, the borrower-focused test has, in essence, been used into the Netherlands (Cherednychenko and Meindertsma 2014). The fundamental guideline is when supplying easy credit rating, finance institutions should work as accountable creditors having a view to preventing customer overindebtedness; for this function, before concluding a credit agreement, they ought to get information in regards to the consumer’s monetary position into the needs associated with customer and assess whether supplying credit to him or her is justified. Footnote 41 the information for this obligation that is general provide in a accountable means is further specified into the codes of conduct regarding the branch businesses that are considered by the Dutch Authority for the Financial Markets to lay down minimum rules on responsible lending for several types of credit. The point that is starting evaluating perhaps the supply of credit is justified is the fact that upon incurring interest- and repayment-related responsibilities underneath the credit contract, the customer nevertheless has the way to allow for his / her fundamental requirements also to keep their recurring expenses. Footnote 42 Should this be perhaps not the situation, supplying credit will be considered reckless. On the other hand, in Greece, where in fact the appropriate conditions of nationwide legislation closely stick to the wording of Article 8 for the credit rating Directive, it isn’t totally clear what type of creditworthiness test – creditor-focused or borrower-focused – has been envisaged (Livada 2016). a situation that is similar exists in Bulgaria. Footnote 43