Tag: credit

Responsible credit in the European Union: on the pre-contractual duty to analyse the consumer’s creditworthiness when granting credit

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Mariana Marques (Master's student in European Union Law at the School of Law of the University of Minho)
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Introduction

In practice, financial institutions often grant credit without analysing the consumer’s creditworthiness. In most cases, credit is granted without analysing any variant that could compromise the borrowers’ financial capacity – and this is particularly prevalent in the granting of credit cards. Thus, any individual can obtain a credit card from most organisations without having to provide essential data, such as their salary slip, for example. Without prejudice to the consumer’s responsibility to take out credit that is appropriate to their income, would consumer credit institutions not have any duty in this regard?

On 11 January 2024,[1] the Court of Justice of the European Union (CJEU) handed down a ruling in which it clarified the duty to analyse the consumer’s creditworthiness –imposed on financial institutions before granting consumer credit. This pre-contractual duty, which is often (and unduly) brushed aside by the entities responsible for it, has been the subject of important developments in the new law governing consumer credit – Directive 2023/2225 of 18 October 2023.

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The importance of the European Banking Authority in harmonising the credit moratorium regime

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by Marina Barata (Master's in Law)
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The pandemic outbreak caused by COVID-19 and the government measures taken by several European Union countries to address or mitigate the spread of the disease had, and continue to have, dramatic consequences for the economy.

Individuals and companies were affected by the economic crisis arising from the successive states of confinement, which created situations of default, even if in some cases temporary, of their financial obligations.

This possible and imminent lack of liquidity on the part of debtors would have a devastating impact on credit institutions, since loans defaults would lead to an increase in the number of defaulters and greater and heavier capital requirements for institutions.

For this reason, credit moratoria were implemented broadly by most of the European Union’s Member States.

Traditionally, a moratorium is the granting of an extension of a line of credit’s payment period, whereby the payment of the instalments is suspended for the period during which the moratorium lasts and the deadline for their full payment is extended for the same period. In the expression of the law, the moratorium is the deferment of the fulfilment of the beneficiaries’ obligation towards the banking system.

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Effective judicial protection of credit rights in the European Union

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 by Marco C. Gonçalves, Professor of Civil Procedure, University of Minho
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The free movement of people, goods and services in the European Union – as a fundamental pillar for the construction of an internal market – led, inevitably, to an increase of the cross-border disputes, that is to say, disputes that are connected with two or more different Member States.

Consequently, this requires the European Union to adopt appropriate procedural instruments to allow the fast and effective resolution of these conflicts, within an area of freedom, security and justice.

In this regard, it is a fact that the European Union has been adopting a set of normative instruments of particular importance to guarantee access to justice in civil and commercial matters, mainly focused on judicial cooperation between the different Member States. In particular, stands out the definition of common rules on jurisdiction, recognition and enforcement of judgments in civil and commercial matters [1], service of judicial and extrajudicial acts [2], taking of evidence [3] and recovery of debts [4].

In any case, with regard to the judicial protection of credit rights in the European Union, the difficulties and problems that arise with regard to the effective satisfaction of creditors demand the urgent adoption of normative instruments that guarantee the protection and adequate satisfaction of these rights.
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