The EU has adopted new rules to boost competition in consumer credit and drive down the cost of personal loans to the bloc's 490 million citizens.
The European Parliament voted by 695 to seven, with 20 abstentions, on a broad cross-party compromise that has the preliminary backing of EU member states, which have joint say.
Two out of three Europeans use loans to buy such items as a car, washing machine or fridge and the European Commission, which drafted the new rules, said they would help create a more competitive market.
Critics countered that consumers and lenders would face more red tape despite six years of debate to streamline the regulations.
The EU's Consumer Affairs Commissioner, Meglena Kuneva, says the new rules will make the market more transparent for consumers and business competitors.
She says the main effect will be to provide standard, comparable information to customers across the EU taking out a credit loan.
Interest rates on loans can vary from 6% in Finland to 12% in Portugal, the Commission said, even though both countries are in the euro zone where the European Central Bank sets a single basic interest rate.
Under the measure, consumers will have to be given standardised information about loans so they can compare offers easily and thereby spur competition to drive down the annual percentage rate of interest.
People would also have a right to withdraw from a loan within 14 days - a new feature in many EU states - and to repay the loan early with a cap on the amount.
The rules cover personal loans between €200 and €75,000 and are intended to open up the market across national borders.
National rules will still apply to loans above €75,000.
The new rules will come into force in 2010.
