LUXEMBOURG (CN) — Merely referring to a national law in a contract is not enough to make a consumer credit agreement clear, Europe’s top court held Thursday.
“[EU law] must be interpreted as meaning that the information to be specified, in a clear and concise manner, in a credit agreement in accordance with that provision includes information on how the period of withdrawal… is to be calculated,” the European Court of Justice ruled.
The Luxembourg-based court is currently closed in light of the Covid-19 pandemic but is still issuing judgments in cases it heard before the outbreak began.
Andreas Poss, identified in court documents as J.C., got a 100,000 euro ($109,000) mortgage from Kreissparkasse Saarlouis in 2012. The contract allowed Poss to withdraw from the agreement within 14 days, but it did not specify this. Rather, it referred to a provision of the German Civil Code detailing this information.
In January 2016, Poss sent an email to the savings bank, based in the southwestern German city of Saarlouis, informing it that he was withdrawing from the contract. The bank responded that the withdrawal period had passed, leading Poss to take the matter to court.
The Regional Court of Saarbrücken referred the matter to the Court of Justice, requesting an interpretation of an EU directive on credit agreements that states: “The credit agreement shall specify in a clear and concise manner the existence or absence of a right of withdrawal, the period during which that right may be exercised and other conditions governing the exercise thereof.”
The German court wanted to know if the directive meant that a consumer must “read numerous legislative provisions in a variety of legislative texts so as to gain clarity as to what mandatory information must be provided in order for the withdrawal period to start to run in the case of his or her loan agreement.”
Under the EU regulation, mortgages are exempted from the credit agreement directive, but the German government requires that mortgages adhere to the requirements. Member states of the 27-country political and economic union are allowed to adapt EU regulations so long as they benefit the consumer.
The Federal Court of Justice, the German supreme court, ruled in 2016 that the standard cancellation policy included in the contract at issue was clear, but the Court of Justice disagreed Thursday.
“Bearing in mind the importance of the right of withdrawal for consumer protection, the information concerning that right is of fundamental importance for that consumer,” the court said.
Poss’ lawyer Timo Gansel said in a statement that the decision “is good and important news for all consumers.”
"With today's ruling, the majority of all consumer credit and leasing agreements concluded since June 2010 are now under scrutiny,” Gansel said. “Banks can no longer just rely on non-transparent wording in their contracts. Every consumer must be able to identify with certainty the essential conditions for exercising the right of withdrawal - such as the beginning of the period.”
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