ECJ ruling on required components in consumer credit agreements
The subject of the proceedings before the Landgericht were car credit agreements between consumers and VW-, BMW- and Skoda-Bank. The contracts got revoked by the consumers. In some cases, after several years. The ECJ has now ruled predominantly in their favor. The information in the credit contracts do not comply with EU law and can be revoked.
The question of the effective exercise of the right of withdrawal was whether the 14-day period of Article 14 (1) of Directive 2008/48/EC has started. For this purpose, the consumer must have received all contractual terms and information pursuant to Article 10 of the Directive.
According to the ECJ, one information required in Article 10 (2) lit. a), c) and e) of Directive 2008/48/EC is the clear and concise Specification of the credit as a “linked credit agreement” and its limitation in time.
Pursuant to Article 10 (2) lit. l) of Directive 2008/48/EC, the credit agreement must specify the default interest rate applicable at the time of conclusion of the agreement in the form of a specific percentage rate and describe the mechanism for adjusting the default interest rate.
The method of calculation must be easily understandable for an average consumer and enable him to calculate the default interest rate based on the information provided in the credit agreement.
According to Article 10 (2) lit. r) of Directive 2008/48/EC, an average consumer must be able to determine the amount of the early repayment penalty. The calculation method of the compensation must be specified in a concrete and comprehensible manner.
Pursuant to Article 10 (2) lit. t) of Directive 2008/48/EC, the contract should also include all the information regarding the out-of-court complaint and appeal procedures and their costs.
Components not required
The ECJ does not require clarification of the specifics of such linked credit agreements within the meaning of Article 3 lit. n) of Directive 2008/48/EC. For example, the consumer in the amount of the credit disbursed to the lender is free from his liability to pay the purchase price.
Article 10 (2) of Directive 2008/48/EC does not require information on national termination rules that do not also apply under EU law.
The ECJ’s ruling has the consequence that a whole range of consumer credit agreements can be revoked.
The 14-day withdrawal period starts with receipt of the information required by Article 10 (2) of Directive 2008/48/EC.
According to the ECJ, the objection of forfeiture or the assumption of an abuse of rights cannot be considered if required components as the above-mentioned information are missing in credit agreements.
This means that some contracts can be revoked even years after they were concluded.
Numerous contract designs in practice do not meet the requirements of the ECJ’s ruling. Since the directive applies to all consumer credit agreements except for loans with liens on real property, many consumer credit agreements are affected.