UPDATE 1-EU lawmakers agree deal on consumer credit

(Adds centre-right agreeing to compromise, byline)

By Huw Jones

STRASBOURG, France Jan 15 (Reuters) - European Union lawmakers reached a broad cross-party deal on Tuesday on a measure aimed at making it easier for the bloc's 490 million consumers to obtain cheaper personal loans.

Ahead of a vote on Wednesday, the European Parliament's biggest bloc, the centre-right European People's Party, decided to back an accord reached last Friday between EU states and the assembly's Socialists and Liberals.

"The EPP will not vote against but in favour of this compromise package with the Socialists and the Liberals," an EPP party official told Reuters.

Amendments tabled by the EPP are now expected to be dropped as the party has also agreed there should be no conciliation -- a showdown between the assembly and EU states when there is no joint deal at second reading.

EPP backing means that parliament will be able to muster an absolute majority on Wednesday, otherwise an earlier version agreed by EU states would have prevailed.

Under the measure, consumers would have to be given standardised information about loans so they could 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.

The rules cover personal loans worth between 200 and 75,000 euros ($297 to $111,500) and are intended to open up the market across national borders, but discussions have been bogged down since 2002.

COMPENSATION CAP

Last-minute talks among lawmakers on Tuesday focused on details of terms related to compensation for early repayments, which will be capped at 1 percent of the outstanding loan if the duration was more than a year.

The Socialists, Liberals and EU states want member states to decide if lenders can seek compensation beyond the cap as the expectation is most states will not grant this right.

The EPP has wanted banks to have an automatic right to demand compensation above the cap if they can show this would be fair and justifiable to cover a loss on the contract.

The centre-right party, although the biggest bloc in the assembly, lacked enough votes to impose its version and did not want to appear isolated.

Some of the wording in last Friday's accord was tweaked -- replacing "costs" with the narrower term "loss" in the compensation formula -- to bring the EPP on board without causing a major change.

EU states are also expected to formally sign off on the deal later on.

EU Consumer Protection Commissioner Meglena Kuneva had urged lawmakers to vote through last Friday's deal.

"It's about consumers being able to make better-informed choices. A vote for this compromise package is a vote for competitive markets," Kuneva told parliament.

More competition in the sector would push down interest rates on loans, which vary from 6 percent in Finland to 12 percent in Portugal.

The 27-nation EU's consumer loans market is worth some 800 billion euros annually, but only 1 percent are cross-border. (Editing by Dale Hudson and Braden Reddall) ($1=.6724 euro)