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Wirtschaftsprüfer, Partner, Financial Services
Senior Manager, Financial Services
Managerin, Financial Services
Associate, Financial Services
Senior Associate, Financial Services
Consumer lending is changing and not only because of new regulation. Across Europe, the way people apply for credit is becoming faster, more digital and increasingly automated. At the same time, regulators are raising expectations around how lenders assess affordability, explain credit decisions and protect consumers. The Consumer Credit Directive II (CCD II) brings these developments together and will have a much broader impact on the market than many organisations may initially expect.
Buy Now Pay Later, embedded finance, interest-free financing and other previously less regulated forms of credit are now firmly within the regulatory spotlight. For banks, fintechs, retailers and digital lending platforms, this means taking a fresh look at how credit is offered; from the first customer interaction and affordability assessment through to automated decision-making, monitoring and ongoing customer communication. One of the most important changes is the move towards more robust and evidence-based affordability assessments. Lenders will increasingly need to look beyond information provided by customers and demonstrate that lending decisions are based on reliable evidence of a borrower’s financial position. CCD II also brings greater attention to the digital customer experience. How credit products are presented, how choices are offered and how automated decisions are explained are becoming important parts of the regulatory conversation.
For many organisations, CCD II may initially feel like another significant regulatory challenge but it also offers an opportunity to step back and ask a broader question: are our lending processes still fit for the way customers borrow today? Organisations that use the transition to strengthen their data, underwriting, governance and digital journeys can do more than meet regulatory expectations. They can build lending models that are more transparent, more sustainable and better able to earn customer trust.
In this publication, we look at the key changes introduced by CCD II and what they mean in practice. We bring together the main areas of regulatory focus from affordability assessments and automated decision-making to digital customer journeys and governance and highlight the practical considerations organisations should address as they prepare for the new requirements.