Upcoming Changes in Credit Advertising Regulations
The European Union’s New Directive 2023/2025 will shape the future of consumer lending across all member states. Adopted on October 18, 2023, the directive mandates that all EU countries align their national legislation with the introduced changes. Bulgaria has a 2-year deadline for transposing the directive into national law and a 3-year timeframe for full implementation.
At the heart of the directive lies a fundamental shift: lenders must act in the interest of the consumer. It significantly raises the bar for consumer protection, requiring more detailed and transparent pre-contractual information about the terms of credit. The directive also bans misleading advertising practices and provides clearer guidelines for the lender-borrower relationship.
This is not merely a regulatory update — it is a comprehensive modernization of the Consumer Credit Directive of 2008, adapted to today's digital environment and market realities. It aims to harmonize lending practices across the EU and improve consumer trust and market efficiency.
What changes does the directive introduce in credit advertising?
The directive introduces a mandatory warning in all advertising materials:
"Warning! Borrowing money costs money."
This type of messaging, previously used in sectors like gambling and tobacco, will now apply to consumer credit as well.
From now on, credit advertisements must focus on clarity, precision, and transparency. All marketing messages must be factually accurate and free from ambiguity. The ads must include specific numerical values and standardized information to help consumers easily understand the cost and terms of credit.
This standard information must be tailored to the communication medium — whether written or spoken — and must be clearly visible or audible. Key information includes:
- Interest rate and type of rate (fixed or variable)
- Fees and Annual Percentage Rate (APR)
- Total loan amount, loan term, total repayable amount, and installment amounts
- Down payment (if applicable, e.g., for purchasing goods/services)
Each ad must include a representative example to clarify the offer in practical terms.
Prohibited Practices in Credit Advertising
The directive explicitly bans several advertising strategies, including:
- Encouraging consumers to take out loans to improve their financial status
- Suggesting that existing loans or credit history have little or no impact on a consumer’s credit score
- Claiming that using credit is a substitute for savings or leads to an improved standard of living
Furthermore, member states are urged to consider restricting promotions that emphasize the ease or speed of obtaining credit. Messaging such as "Instant approval" or "Fast and easy loans" may be limited or prohibited.
Consumer-Centric Communication Becomes the Standard
Under the new rules, marketing communication must serve the consumer’s interests above all. The aim is to create a fairer, more transparent lending environment that minimizes financial risk and empowers consumers to make informed decisions.
Key Takeaways from the New Directive
- Introduces warning label: “Borrowing money costs money”
- Requires clear, standard, and comparable information
- Bans misleading or manipulative advertising
- Encourages early identification of over-indebtedness risks
- Promotes responsible lending in the consumer's best interest
This is just one in a series of changes aimed at reshaping how credit is marketed and granted in the EU. For lenders, compliance is not optional — it's an essential step toward building sustainable and ethical lending practices.