Credit Intermediation

What is credit intermediation?

Credit intermediation covers distinct situations. It can first of all designate the situation where a consumer asks a specialised credit broker to assist him in finding the most appropriate mortgage or consumer credit deal. It can then designate the offer to the consumer of a credit facility at a point of sale in order to purchase specific goods.

What are the advantages for consumers ?

Credit intermediation practice is highly called upon by consumers who find an accessible, efficient and competitive way of amortising costs over a given period of time for all sorts of goods and services such as motor vehicles, household appliances or electronics. In addition, it is an essential support to products distribution for European manufacturers. Moreover, credit intermediation is a key tool for product and distribution processes innovation which benefits the all European banking industry.

Latest news from the European Commission

Credit intermediation has been identified by the European Commission in its White Paper on Financial Services Policy and Green Paper on Retail Financial Services as one potential future initiative.

The London based consultancy - Europe Economics was commissioned by the European Commission's DG Internal Market to undertake a study on credit intermediation. Its task was to identify the existing regulations in this field, markets size, scope of credit intermediaries' activities, business models, risks of fraudulent activities and scale and scope of cross-border activities. The study can be consulted here.


Eurofinas position

As a preliminary position on credit intermediation, Eurofinas believes that a clear distinction must be made between entities that provide credit mediation to third parties for remuneration as their main activity (e.g. brokers, agents, etc.) and entities that practice credit mediation as an ancillary activity (i.e. dealers and retailers involved in the distribution of credit at the point of sale). This is reflected in the CCD.

The role of the latter is very different from that of the former. Dealers and retailers have no role in respect of the granting of credit, take no part at all in any part of the credit decision and have no other role than collecting information on the consumer on behalf of the lender. The range of credit products available at the point of sale is limited. Intermediaries are also not mandated by the consumer and, consequently, receive no fee from him.

On 4 July 2008, Eurofinas organised a workshop on the distribution of consumer credit at the point of sale in Brussels with representatives of the European Commission. The aim of this event was i) to explain to EC officials the processes and specificities of point of sale finance, ii) to allow EC officials to ask questions directly to practitioners (including motor dealers and retailers) and iii) to identify how Eurofinas could provide further expertise on the subject matter.

Consult the report on Eurofinas Workshop on POS Finance.