Charging different prices to different consumers for the same credit product based on their personal data for reasons unrelated to counterparty credit risk (personalized credit pricing), is a pricing practice that has caused significant controversy among regulators and scholars. While the prevalence of this practice is unclear, opponents point to the potential harmful effects for financially vulnerable consumer groups who would be offered higher prices, exacerbating economic inequality. One of the regulatory approaches used to address these risks is the ‘product governance approach’ (PGA). This article analyses the costs and benefits of using PGA to regulate the practice. Drawing from regulatory theory, it explores the foundation and core dimensions of the approach (substantive, procedural and conduit standards) and its bases in the Consumer Credit Directive. Subsequently, based on economic theory and examples from implementations by supervisory authorities, it concludes that PGA is poorly suited to impose substantive standards on the practice and may have significant adverse consequences. The analysis concludes with general recommendations for regulators considering PGA, and specific considerations for the interpretation of the Consumer Credit Directive.
Common Market Law Review