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At a Glance: Europe's Debt/Credit Situation

By Stefano Valentino

• On average, U.S. consumers borrow three times more than Europeans.

• In the major European countries, late repayments and overdraft charges are capped by law.

• The European Credit Research Institute reports that due to the global recession, the growth rate of European retail lending was the lowest in a decade.

• Europeans' personal debt has grown -- from $1.7 trillion in 2006 to $1.9 trillion in 2008.

• More than 60 percent of debt is held by the British, Germans and French. Their countries are Europe's three largest economies.

• In May 2008, the European Union adopted the "Consumer Credit Directive" which takes effect May 2010. It aims to put in place uniform advertising standards for loans, annual percentage rate calculations and pre-contractual and contractual information so consumers can clearly understand and compare cross-border offers.

• The new rules requires a 14-day cooling-off period, during which customers are permitted to cancel the contract for any reason.

• When a bill appears to be disproportionately high because of additional fees, consumers will have the right to be reimbursed by the lender unless the lending institution submits proof that those fees are justified.

• Another European Union law, called the Payment Service Directive, provides additional protection for debit cards payments and direct withdrawals. As of November 2009, all purchases and money transfers below $74,000 require full disclosure of charges and two months notice on any detrimental changes to an account.

• Underlying the new rules is the belief that more uniformity of the rules and cost of credit and payment services will boost competition between lenders and banks throughout Europe, and will make it easier for consumers to compare loans and other financial services and choose the best and cheapest option.

• Most European countries prohibit merchants from charging interchange fees on consumers' bills.

• Currently, fees can vary quite a bit from country to country because of the fragmentation of national markets. For example, loan interest rates can be as low as 6.3 percent in Finland and as high as 12.2 percent in Portugal.

• Transaction fees with Visa and MasterCard fluctuate between 0.1 percent and 0.7 percent of the purchase value.

• Bankruptcy regulations differ from country to country. They are stricter in the U.K. and Ireland, where all assets are transferred to a trustee. In Germany, France and Spain, part of the debtor's assets is exempted to cover living expenses.

Recent polls conducted by the European Commission, the executive body of the E. U., reported that 79 percent of its citizens are in favor of the new measures.

• Many consumer groups, such as the Bureau of European Union Consumers, have criticized the new directive because it doesn't address mortgages, which represent 70 percent of all loans granted to households.

Stefano Valentino is an International Visiting and Fulbright Scholar at the UC Berkeley School of Journalism. He is currently working on a research project on cross-border cooperation between U.S. and European reporters on global issues.