The European Union member states agreed on Monday to set EU-wide rules on consumer loans, which will facilitate transnational borrowing by requiring lenders to be more transparent.

The main effect of the new rules would be for the banks to provide standard and comparable information to customers across the EU taking out a credit loan.

Consumers will be assured access to key facts and figures in advertisements. Before any credit agreement was concluded, financial institutions must give customers an information sheet.

The so-called European Credit Information Form will be uniform throughout the EU and contains essential information on the credit, such as interest rates, amount, number and frequency of payments.

When they conclude the contract, consumers will receive comprehensive information so that they have a reference document describing their rights and their obligations. The new rules contain a detailed list of information requirements.

The proposed directive, which still has to be approved by the European Parliament, also sets common standards on a right of withdrawal, so consumers can change their mind after conclusion of a contract, without having to give any reason and without any charge.

At present, only Germany and a few other member states allow consumers to withdraw from a credit agreement within 14 days. In the future, the right of withdrawal will apply throughout the EU.

In addition, the new rules limit the early repayment penalty that credit providers can demand in cases where consumers repay their credit earlier than initially agreed.

"This agreement delivers clear practical advantages to Europe's consumers. For example, in the future it will be possible to make genuine comparisons among credit offers throughout Europe. Credit providers will be subject to uniform transparency rules, and the annual percentage rate of charge for credit will be calculated in accordance with uniform standards," said German Federal Minister of Justice Brigitte Zypries, whose country is holding the EU presidency.

With an aim to improve consumer protection throughout Europe, the new rules will also serve to deepen the EU internal market. More comparable information will help people to shop for inexpensive offers throughout the 27-nation bloc, leading to more competition that would in the end bring down prices and borrowing costs.

Currently, the cost of credit varies greatly across the EU from the lowest rate of six percent in Finland to above 12 percent in Portugal.

As the EU financial market is still divided by national borders, direct transnational consumer credit represents less than one percent of all credit transactions within the bloc.

Consumer loans in the EU, a market with a capacity of 800 billion euros, represent on average almost 18 percent of the grossincome of retail banking, according to figures from the European Commission.

Once adopted by the European Parliament, the new directive must be transposed into the national law of the member states within two years.