Belgium Court Told to Resolve Student’s Loan Default

(CN) – The European Court of Justice gave a Flemish court the go-ahead Thursday to rule on the fairness of an interest-free loan that a student got from her college for a school trip.

Karel de Grote-Hogeschool is a Roman Catholic college in Antwerp, Belgium, with about 12,000 students. In 2014 it agreed to cover the $1,800 debt one of these students, Susan Kuijpers, accrued because she could not pay for the past two years of school-registration fees or for what is described in the ruling as a “study trip.”

The contract gave Kuijpers eight months to make installment payments on the debt, but she ultimately defaulted and remained in default despite a letter of formal notice.

Per the terms of the contract, the school brought a suit against Kuijpers the following year to obtain the $1,800 principal together with a default interest of 10 percent and indemnification of its costs.

Kuijpers missed her appearance before the Magistrates’ Court in Antwerp, however, and Karel de Grote-Hogeschool’s claim for the principal sum was upheld.

Still the court was unsure what to do about the interest and indemnification demands, which amounted to approximately $500.

Referring the matter to the European Court of Justice, the Antwerp court questioned whether it should take the initiative to examine whether the underlying contract falls within the scope of Belgium’s interpretation of EU directive on consumer protection.

It also sought guidance on whether the contract falls within the scope of the national law on unfair terms.

The Fifth Chamber of the Court of Justice replied Thursday that the court “is required to examine of its own motion whether the contract containing that term falls within the scope of that directive and, if so, whether that term is unfair.”

The ruling goes on to assure the court that Karel de Grote-Hogeschool can be considered a seller or supplier under the consumer-protection directive, even though it is an educational establishment financed mainly by the state.

“It is clear from the case file before the court that, in any event, the case in the main proceedings does not directly concern the task of an educational establishment such as the KdG,” the ruling states, abbreviating the school’s name. “Rather, in issue is a service provided by that establishment, which is complementary and ancillary to its educational activity, consisting in offering, through a contract, an interest-free, installment repayment plan in respect of sums due to it by a student. Such a supply is, by its nature, an agreement to provide payment facilities for an existing debt, and is, fundamentally a contract for credit.”

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