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Information to be Included in Credit Agreements – ECJ’s Preliminary Ruling

On the 19th of December 2019 (C290-19), the European Court of Justice (ECJ or the Court) gave its interpretation by virtue of a preliminary ruling on the interpretation of Article 10 of Directive 2008/48/EC (on credit agreements for consumers) (the ‘Directive’).

This request had been made in proceedings between RN, a consumer, and Home Credit Slovakia a.s. (‘Home Credit’) with regards to a consumer credit agreement concluded by the consumer with that credit provider, in which the annual percentage rate of charge (‘APRC’) is not set at a single rate. APRC refers to the cost of a loan to the consumer, expressed in terms of the total value of the loan.

The dispute in the main proceedings and the question referred for a preliminary ruling was whether Article 10(2)(g) of the Directive is to be interpreted as allowing for the APRC to be indicated in an agreement, not as a specific percentage but as a range between two figures (from-to).

Article 10(2)(g) of the Directive provides that:

“The credit agreement shall specify in a clear and concise manner … the annual percentage rate of charge and the total amount payable by the consumer, calculated at the time the credit agreement is concluded; all the assumptions used in order to calculate that rate shall be mentioned.”

Briefly, the facts are as follows: RN and Home Credit concluded a consumer credit agreement which stated the monthly repayments, the interest rate and the APRC (between 21.5% and 22.4%). The contract also specified that the APRC depended on the date on which loan was granted to RN and that the APRC would be communicated to him after that date.

On the 2nd of July 2017, Home Credit informed RN that he had repaid the loan in full. However RN brought an action against Home Credit for repayment of sums paid but not due (unjustified enrichment), on the grounds that the credit should have been considered to be free of interest and charges, since the APRC had been set in contract not as a single rate but as a range referring to a minimum and a maximum rate.

That claim was dismissed by the court of first instance as the court considered it to be disproportionate to penalise the lender by taking the view that no interest or charges were payable in respect of the loan on the sole ground that the APRC was expressed as a rate within a range of two figures.

The consumer brought an appeal before the referring court and the latter questioned whether fixing the APRC by means of such a range is contrary to Directive 2008/49. Home Credit argued that the credit agreement had been concluded by telephone and that the applicant had 35 days to accept or refuse the credit agreement offer. For that reason, Home Credit was not able to give a precise indication of the date on which the loan would be grated, on which the APRC was dependent. However, the referring court considered that argument as unconvincing.

The ECJ noted that it must be borne in mind that Directive 2008/48 was adopted to ensure that all consumers in the EU enjoy a high and equivalent level of protection of their interests and to facilitate the emergence of a well-functioning internal market in consumer credit. The Court stated that “it is clear from recital 19 of that Directive that it seeks, inter alia, to ensure that consumers receive adequate information, prior to the conclusion of the credit agreement, in particular on the APRC throughout the EU, to enable them to compare those rates”. For a consumer, the total cost of credit presented in the form of an APRC is of critical importance.

Considering the foregoing considerations, the answer to the question referred is that Article 10(2)(g) of Directive 2008/48 must be interpreted as precluding, in a consumer credit agreement, the APRC from being expressed not as a single rate but as a range referring to a minimum and a maximum rate.