Non-Discrimination in consumer credit: What Article 6 of the revised Consumer Credit Directive really requires
This article explains the new non-discrimination obligation and its practical implications for credit decisions.
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The revised Consumer Credit Directive (Directive (EU) 2023/2225) introduces, for the first time, an explicit prohibition on discrimination in access to consumer credit. Article 6 provides that the conditions for obtaining consumer credit must not discriminate on grounds including nationality or place of residence, while Recital 31 explains that the objective is to support the proper functioning of the EU Single Market by ensuring that mobile consumers are treated fairly.
The provision has nevertheless prompted an important discussion within the banking sector:
- Does it require banks to offer consumer credit throughout the European Union?
- Or does it simply prohibit discriminatory treatment where a bank has already chosen to operate?
A careful reading of the Directive, its legislative history and broader principles of EU law points to the latter. Article 6 seeks to eliminate unjustified discrimination against consumers, not to determine where banks must conduct business.
A new rule against discrimination
Article 6 requires Member States to ensure that the conditions for granting consumer credit do not discriminate against consumers on any of the grounds listed in Article 21 of the Charter of Fundamental Rights of the European Union, including nationality, or on the basis of residence, where a consumer applies for, concludes or holds a credit agreement.
This is a significant innovation. Previous EU consumer credit legislation contained no comparable provision. The explicit inclusion of residence reflects the reality that many barriers encountered by mobile EU citizens arise not because of their nationality but because they have exercised their right to live in another Member State.
Crucially, Article 6 governs how lenders assess applicants, not where they choose to offer consumer credit.
Reading Article 6 together with Recital 31
Recital 31 is key to understanding the provision. While confirming that consumers should not be discriminated against on prohibited grounds, it also recognises that different treatment may be justified where it pursues a legitimate objective and the means employed are appropriate and necessary.
This reflects a well-established principle of EU law. Equal treatment does not prohibit every distinction between consumers; it prohibits distinctions that lack an objective and proportionate justification. Legitimate differences in credit risk, legal obligations or operational constraints may therefore justify different treatment in appropriate circumstances.
The legislative intent
The Commission’s proposal for the revised Directive and its accompanying Impact Assessment identified persistent obstacles faced by consumers exercising their right to free movement. Consumers relocating to another Member State frequently encountered difficulties obtaining credit because lenders relied on residence as a proxy for risk or lacked access to reliable foreign credit information.
Article 6 was introduced to reduce those barriers and promote a more integrated market for consumer credit. Nothing in the Commission’s proposal, explanatory memorandum or the subsequent legislative negotiations suggests that the Directive was intended to oblige banks to expand into markets where they have chosen not to operate. Rather, the objective was to ensure that consumers are assessed using relevant and objective criteria once they fall within the scope of a lender’s activities.
This interpretation is also consistent with Article 16 of the Charter of Fundamental Rights, which protects the freedom to conduct a business. The Court of Justice has consistently recognised that commercial autonomy may be limited only where justified by objectives of general interest and where the restriction is proportionate.
Two different legal questions
Much of the current debate arises from conflating two distinct legal questions.
The first concerns market participation. A Spanish bank may decide, for commercial, operational or strategic reasons, to offer consumer credit only in Spain. Article 6 does not require that bank to market loans in Germany, France or any other Member State.
The second concerns individual treatment. Suppose that same Spanish bank receives an application from a German citizen legally residing in Spain who wishes to finance the purchase of a washing machine. If the applicant satisfies the bank’s normal lending criteria, the application cannot be rejected solely because the customer is German or because they have exercised their right to live in another Member State. Once a bank has chosen to provide consumer credit in Spain, applicants within that market must be assessed using objective and non-discriminatory criteria, unless different treatment can be objectively justified under EU law.
The distinction is straightforward. Banks remain free to decide where they operate. Article 6 governs how they treat consumers within the markets in which they have chosen to operate.
Objective justification in practice
There is currently no judgment of the Court of Justice interpreting Article 6 itself. Consequently, some uncertainty remains regarding its precise application.
Nevertheless, existing case law on equal treatment and the internal market indicates that distinctions based on nationality or residence must pursue a legitimate objective and be appropriate and necessary to achieve it. Blanket exclusions based solely on nationality or place of residence are therefore likely to face greater scrutiny than lending policies based on demonstrable credit risk or genuine legal or operational constraints.
Whether commercial considerations alone can justify different treatment remains an open question. However, as access to cross-border financial information improves through solutions such as Mifundo, which connect lenders to verified credit and bank account data from other Member States, lenders are increasingly able to assess applicants on their actual financial circumstances rather than assumptions about the availability of information. As a result, blanket distinctions based solely on nationality or place of residence may become progressively more difficult to justify under the proportionality principle reflected in Recital 31.
Practical implications for banks
Article 6 should not be interpreted as requiring banks to become pan-European lenders. Institutions remain free to determine the geographic scope of their business.
What the Directive does require is that, within the markets where a lender chooses to operate, consumers are not disadvantaged solely because of their nationality or place of residence. Banks should therefore review their credit policies to ensure that any distinctions between applicants are based on objective, proportionate and demonstrable factors rather than broad exclusions linked to protected characteristics.
Conclusion
Article 6 introduces an important safeguard for consumers exercising their right to free movement, but it should not be misunderstood.
The Directive does not require banks to enter new markets or offer consumer credit throughout the Union. It does require that, once a bank chooses to operate in a particular market, applicants are assessed using objective, proportionate and non-discriminatory criteria.
That distinction preserves both objectives underpinning the Directive: strengthening the Single Market while respecting banks’ legitimate commercial autonomy.
