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Financial Market Development Foundation

In the draft guidelines the EBA goes beyond the mandate of the Action Plan and touches upon areas not only affecting the stability and security of the European banking sector, but also concerning the protection of consumer interests. Moreover, the scope of the Guidelines has been extended beyond the area of credit institutions and also covers consumer lenders - non-credit institutions, i.e. non deposit-taking creditors, to whom Section 5 of the Guidelines would apply. In the Foundation's view, the EBA's action on guidelines for CCD lenders should be considered premature. The Foundation calls for a temporary resignation by the EBA from the formulation of guidelines in relation to CCD lenders and the possible addition of these entities to the scope of the guidelines after the adoption of the amended CCD Directive.
We do see several serious obstacles that are specified in our detailed position. First – the CCD market is not subject to the supervisory regime on a EU level. There no competent authorities designated in the CCD to supervise the market – the CCD itself requires the CC providers to be either supervised or regulated. There is no clarity on how the non-bank lenders should apply the guidelines and who will be responsible for their execution. Nevertheless it needs to be emphasized that the implementation of the guidelines by financial institutions in accordance with the proposed schedule is not feasible for objective reasons. The process of implementing the guidelines will mean changes in procedures and processes, as well as the need to adapt IT systems, which is a long-term process. It should be borne in mind that only after the publication of the final version of the guidelines, will financial institutions start analysing and implementing them. The period between the publication of the guidelines and their entry into force should therefore be long enough to allow adaptation processes to be carried out without exposing financial institutions to the negative consequences of national supervisory authorities. Bearing in mind the scope and substance of the issues to be regulated at the level of the guidelines, we call for a minimum period of 18 months between their publication and their entry into force.
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A number of data listed in Annex 2 may be difficult for lenders to obtain - examples include proof of residence at a particular address, information on the structure of income received (broken down by basic income, bonuses, overtime), credit registers data covering at least information on liabilities and arrears in payments. I would like to point out that there is no free credit register in Poland - there are commercial databases on interbank liabilities and databases recording arrears in payments. Using each of these databases for the purposes of implementing the guidelines would mean a significant increase in operating costs, but it should be borne in mind that the lack of information about the consumer in a given database does not mean that the consumer has no liabilities or late payments - he may have such that have not been reported to the databases. Thus, even if the creditor exercises due diligence, it may not be possible to comply with the recommendation referred to in point 85 of the guidelines: 'Institutions and creditors should have a sufficiently comprehensive view of the borrower's financial position, including an accurate and up-to-date comprehensive view of all the borrower's credit commitments (single customer view).' The same applies to the fulfilment of the requirements of point 88 of the draft guidelines. However, the draft guidelines in paragraph 90 require proof of the information and data on which the decision to grant the loan was based, including the actions taken and the assessments made. In the opinion of the Foundation, it is not clear what kind of activities the EBA means by 'documenting.' With short-term, low-value loans, in particular those granted via electronic channels, it is a practice to make credit decisions based on income information provided by the consumer. It is therefore doubtful whether, in the light of points 88 and 90, for such loans the creditor will have to verify the consumer's statement of income and document this process accordingly. If this is the intention of the European Banking Authority, it should be emphasised that the guidelines will lead to a change in the business models of some entities and to the elimination of certain loan products from the market, which, in the opinion of the Foundation, is not justified either by the Action Plan or by the protection of consumers' interests.
The guidelines contained in the draft are too detailed and may turn out to be too restrictive, in particular for entities which do not generate systemic risk. With reference to the guidelines in Section 5 and Annex 2, it should be pointed out that they completely ignore the fact that a EUR 200 loan does not require the same creditworthiness assessment approach as a EUR 75 000 loan. In the Foundation's view, the guidelines on the scope of the information required for a credit decision should be differentiated according to the amount of credit granted or credits up to a certain amount (e.g. EUR 5 000) provided by non-depository entities should be excluded from the scope of the guidelines. Otherwise, the proposed guidelines may result in an excessive increase in the cost of credit activity that is not justified either by the protection of consumer interests or by the reduction of systemic risk.
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Agnieszka Wachnicka
+48600400228