Responsible cross-border lending: why banks must act now
EU’s CCD II strengthens responsible lending by Nov 2025, challenging banks to serve cross-border customers compliantly
The European financial sector is entering a decisive moment. By 20th November 2025, all Member States must transpose the Second Consumer Credit Directive (Directive (EU) 2023/2225, or CCD II) into national law – and by 20th November 2026, those rules must be enforced across the Union. Far from being a technical update, CCD II reinforces the obligation of responsible credit across the Union, tightening standards for affordability checks and expanding coverage to new products such as “buy now, pay later.” For banks, the question is pressing: how can they ensure compliance when dealing with the millions of Europeans who live and work outside their home country.
Defining responsible credit
Responsible credit is not a slogan – it is a binding legal duty. The original Consumer Credit Directive (2008/48/EC), the Mortgage Credit Directive (2014/17/EU), and now CCD II all require lenders to assess creditworthiness before granting a loan. Article 18 of CCD II obliges creditors to base decisions on “sufficient information,” combining consumer-provided data with evidence from relevant databases.
The European Banking Authority (EBA) guidelines on loan origination and monitoring (last updated in 2022 and earmarked for adjustment to the CCD2) add precision: assessments must be risk-based, documented, and proportionate; they should capture income, liabilities, and the consumer’s resilience to shocks. The goal is simple: preventing over-indebtedness and ensuring loans remain affordable throughout their term. In this sense, responsible credit is both consumer protection and sound risk management.
Credit databases: The bedrock of lending
To put the principle into practice, banks rely on credit bureaus and credit registers. These institutions reduce information asymmetry, standardise scoring, and encourage repayment discipline. A robust solvency check is impossible without them.
Yet cross-border reality exposes a gap. Credit data remain siloed at national level, with different formats and standards. A bank in Germany cannot easily access a Spanish or Polish borrower’s record. The result is either conservative refusals, excluding creditworthy clients, or approvals made with incomplete data, raising default risks. Studies suggest that when histories of cross-border borrowers are shared, risks fall even below domestic averages.
Non-discrimination and equal treatment
EU law is clear: citizens cannot be denied credit purely because of nationality or residence. Article 6 of CCD II echoes earlier provisions in the Mortgage Credit Directive, prohibiting discrimination among EU residents. But in practice, data fragmentation creates de facto discrimination. If banks lack the tools to assess a foreign applicant fairly, they fall back on blanket rejections or excessive collateral demands. Closing the data gap is therefore not only prudent risk management but also a legal obligation.
Supervisors: oversight and sanctions
The framework is enforced by national competent authorities, the ECB in its supervisory role, and the EBA through guidelines and peer reviews. Supervisors scrutinise banks’ loan origination files, governance systems, and affordability models. They can demand remediation, impose fines, restrict business lines, or in extreme cases withdraw licences. Public naming and shaming adds reputational weight. The message is clear: responsible credit is non-negotiable.
Measuring the cross-border market
How large is the challenge? According to Eurostat, roughly 20 million EU residents live in a Member State other than their country of birth. In addition, 1.4 million people move each year within the EU for work. If we add people with business or personal interests outside of their native country, our estimates put the number of multi-country people in Europe at 45 million.
Many require credit whether for housing, vehicles, or personal needs. For banks, this represents both a compliance duty and a significant growth opportunity. Ignoring it risks leaving a profitable market segment underserved.
Technology as the enabler
The solution lies in technology. At Mifundo, an Estonian fintech financed by the European Innovation Council as a strategic investment for the EU, we have built a platform linking national credit databases across Europe. Through APIs, we standardise formats, verify identities, and transfer histories securely across borders. Partner banks report tangible benefits: a 15% increase in uptake and a 40% reduction in non-performing loans within a year of integration.
For lenders, tools like Mifundo mean they can:
- Conduct proper affordability checks for foreign applicants.
- Reduce default risks by relying on complete financial profiles.
- Demonstrate alignment with CCD II and EBA guidelines.
- Unlock new markets or market segments without compromising prudence.
What banks should do next
Member States must transpose CCD II by 20 November 2025 – with the rules enforced from 20 November 2026, banks need to act now. Steps include auditing decision systems against CCD II, engaging with cross-border data providers, and working transparently with supervisors. Above all, institutions should view responsible lending not as a burden but as a strategic opportunity: by serving mobile, multi-country Europeans fairly, they expand their customer base, strengthen trust, and mitigate risk.
The message is simple: by embracing innovation and ensuring non-discriminatory practices, banks can turn compliance into competitive advantage. Responsible credit should not stop at national borders and, in 2025, it cannot.
