Case law of the Court of Justice of the EU – Consumer protection

On 19 December 2019, the Court of Justice of the European Union (“Court of Justice”) issued a judgment based on a reference for preliminary ruling in case C-290/19, RN v Home Credit Slovakia, a.s., in which it considered a question whether it is permissible to set the APRC in a consumer credit agreement not as a single rate, but as a range referring to a minimum and a maximum rate.

Facts of the case

The question referred for a preliminary ruling arose from a court proceeding in a matter of the plaintiff: RN against the defendant: Home Credit Slovakia, a.s. (“Home Credit”) for repayment of sums paid but not due. In 2013, RN and Home Credit concluded a consumer credit agreement for the amount of EUR 3 359,14. The agreement contained standard statutory elements of a consumer credit agreement [1] , such as the set specific amount of instalment, the interest rate and the repayment period. As concerns indication of the annual percentage of the total amount of credit (“APRC”), however, Home Credit did not indicate this information in the agreement as a specific numerical value, but as a range in the form of “from-to” (i.e. the APRC between 21.5% and 22.4%).

After the full repayment of the credit in 2017, RN brought an action against Home Credit for repayment of the sum of EUR 1 932.10, since, according to it, the credit agreement was concluded in conflict with the statutory conditions concerning the consumer credit, therefore it should have been considered to be free of interest and charges. In the view of RN, the agreement did not satisfy the formal requirements, namely as concerns the manner of fixing the APRC. Home Credit argued in this respect 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 granted.

That claim of the plaintiff was dismissed by the court of first instance, since it found that the credit agreement satisfied all the requirements. RN brought an appeal against this decision of the court of first instance. The appellate court took an opposite view in the matter, when it noted that “the lack of knowledge of the date on which the loan would be granted does not exempt the lender from indicating the APRC by reference to a specific percentage, expressed as a single figure”.

The Regional Court then referred to the Court for a preliminary ruling a question, whether Directive 2008/48/EC on credit agreements for consumers (“Directive”) (Article 10(2)(g)) is to be interpreted as meaning that a consumer credit agreement satisfies the requirements laid down in the Directive if the APRC is indicated in the agreement, not as a specific percentage, but as a range between two figures (from‑to)?

Legal assessment of the case

In the reasoning part of the judgment, the Court first referred to a number of provisions of the Directive, where the APRC is expressed as a single rate and not as a range between two figures (for example Articles 3 and 19). According to the Court, it follows from the general scheme of the Directive that the APRC is to be set as a single rate. The reason for this is to ensure that consumers receive adequate information, prior to the conclusion of the credit agreement, in particular on the value of the interest rate and the APRC. However, the fixing of the APRC as a range between two figures and not as a single specific rate may not only make it more difficult to assess the total cost of credit, but may also mislead the consumer as to the actual extent of his commitment.

The Court further expressly pointed out “[…] that, for a consumer, the total cost of credit, presented in the form of an APRC calculated according to a single mathematical formula, is of critical importance. That rate enables the consumer to assess, from a financial point of view, the extent of the commitment associated with the conclusion of the credit agreement […]”.

According to the Court, the fact that certain information, in particular the date of conclusion of the credit agreement and the date of drawdown of the credit, was not known by Home Credit when it made the offer, is of no consequence. The Directive explicitly foresees this very case (Annex 1, Part 2). Thus, where the date of conclusion of the agreement is not known, the date of the initial drawdown is assumed to be the date which results in the shortest interval between that date and the date of the first payment to be made by the consumer to the creditor. The Court concluded in this respect that despite the fact that such circumstances are not known by the creditor, fixing the ARPC as a single rate would not be impossible or would not be excessively difficult for him.

Therefore, the Court answered the question referred for the preliminary ruling in such a way that the Directive precludes, 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.

______________________

[1] Pursuant to the Act No. 129/2010 Coll. on consumer credits and other credits and borrowings for consumers and on the amendments of certain acts (“Act”).