On 17 April, the German Bundestag adopted a comprehensive law implementing the EU Directive on consumer credit agreements. The objective of the reform is to strengthen consumer protection in credit transactions – particularly in the area of small consumer loans and so-called “Buy now, pay later” (BNPL) models. At the same time, requirements for lenders are being significantly tightened.
With this reform, Germany is implementing the new EU Consumer Credit Directive. In the future, previously less regulated forms of financing will also be subject to increased supervision. The focus is especially on digital consumer credit, instalment payment models in online retail, and stricter requirements for creditworthiness assessments.
Key changes at a glance
- Expansion of scope
Small loans of up to €200, short-term loans, and “Buy now, pay later” models will now also fall under consumer protection rules. - Stricter creditworthiness assessment
Lenders will be required to conduct more comprehensive credit checks on consumers – similar to those already applied in mortgage lending. - Electronic form instead of written form
Consumer credit agreements can in future be concluded more easily in digital form. - Regulation of scoring and data protection
The use of credit scoring will be subject to tighter legal regulation.
Outlook: Possible impact on the German securitisation market
The reform could also have consequences for the German securitisation market. On the one hand, stricter credit assessments may lead to higher-quality loan portfolios in the consumer loan segment in the long term and strengthen investor confidence. On the other hand, the new rules could reduce lending volumes in “Buy now, pay later” financing or small-ticket consumer loans.
In addition, the expanded information and assessment requirements will increase administrative burdens for originators, particularly affecting smaller firms. FinTech companies in particular are expected to face tighter regulation, which could negatively impact their cost structures and ABS pipelines. The actual effects remain to be seen