TSUE changes the rules of the game! Can borrowers request returns? judgement in Case C-472/23 Lexitor Sp. z o.o

sobotajachira.pl 4 months ago

On Thursday, February 13, 2025, the Court of Justice of the European Union (TEU) issued judgement in Case C-472/23 Lexitor sp. z o.o. concerning the transparency of credit costs. If the bank overestimated the RRSO or did not supply clear rules on the charging of fees, borrowers may request a free debt sanction (SKD). Commenting on our expert – Adw. Sandra Ostrowska.

Facts

Lexitor is simply a Polish company dealing with debt collection, for which the consumer has transferred his rights under a consumer credit agreement concluded with the bank. The debt was worth PLN 40,000. Claims under the credit agreement are PLN 12,900, and in addition statutory interest for delay.

In support of the action, Lexitor raised 2 arguments

The increase in the actual yearly interest rate (RRSO), according to the company, should not bind the consumer and should be classified as an unfair practice utilized by the creditor,
The agreement does not specify clearly the reasons and rules for expanding the fees associated with its execution, which should consequence in the application of free credit sanctions.

The Court of Justice answered the following questions for a preliminary ruling

The first question is the overvalue of the RRSO: Is the creditor in breach of the information work on the consumer in the event of an overvalue of the RRSO and subsequently the consumer credit agreement being considered unfair?
Second question: information on fees: Does the fact that the credit agreement lists a number of situations that may lead to an increase in the costs associated with the performance of the contract, while the consumer is incapable to verify their occurrence or impact on those costs, constitute a breach of the information obligation?
Third question: proportionality of free credit sanctions: Is it permissible under Directive 2008/48 to apply a free credit punishment consisting in depriving the creditor of the right to interest and charges, regardless of the seriousness of the infringement and its impact on the consumer's decision to conclude a credit agreement?

Judgment of the Court of Justice: Full consumer protection

First of all, The CJEU recalled that the debt agreement should supply a clear and concise figure of the ROSO calculated at the time of its conclusion. However, the calculation of the RRSO assumes that the contract will apply for the agreed period. Therefore, the indication in the debt agreement of the RRSO, which appears to be overstated due to the fact that any of the terms of that agreement were subsequently considered unfair, does not in itself constitute a breach of the information obligation.

Comment: The question has been asked in an unfortunate way, which does not reflect the specificity and problems of overstatement of the ROSO in consumer credit agreements in Poland.

Although the answer to the question itself denies that the over-value of the ROSO does not in itself constitute an infringement of the information obligation, the Court of Justice itself points out that for the consumer, RRSO is essential as the full cost of credit, presented in the form of a rate calculated utilizing a uniform mathematical formula. In fact, the RRSO allows the consumer to measure from an economical point of view the degree of the work to conclude a credit agreement (judgment of 19 December 2019, Home Credit Slovakia, C‐290/19, EU:C:2019/1130, paragraph 29 and the caselaw cited there). The value of the RRSO is crucial for the consumer, as it allows to verify which offer of the consumer credit contract is the cheapest, overriding this value deprives the consumer of decision-making and impairs its economical sphere.

The RRSO, which does not faithfully reflect all the costs listed in Article 3(g) of Directive 2008/48, deprives the consumer of the anticipation of defining the scope of his work in the same way as the absence of an indication of that rate [see, to that effect, judgement of 21 March 2024, Profi Credit Bulgaria (Additional services to the credit agreement), C-714/22, EU:C:2024:263, paragraph 55).

The CJEU besides stresses that the work to indicate the RRSO in the debt agreement in a clear and concise manner is not limited to a ban on underselling it, since the RRSO's incorrect indication may besides in rule trust on overvalue. On the another hand, the overvalue of RRSO in consumer credit agreements leads to the consumer being deprived of its applicable usefulness and thus the overvalue of RRSO is contrary to the nonsubjective given by Article 10(2)(g) of Directive 2008/48.

At this point, it should be recalled that the calculation of the RRSO is carried out on the basis that the credit agreement will apply for an agreed period and that the creditor and the consumer will comply with their obligations in accordance with the conditions set out in that agreement and within the time limits specified therein. In this state of affairs, the work to include a RRSO in a credit agreement is fulfilled if the RRSO indicated in the contract corresponds to the RRSO calculated in accordance with the mathematical expression set out in Part I of the Annex to that Directive on the basis of the ‘total cost of credit borne by the consumer’ within the meaning of Article 3(g) of that Directive, which includes the costs which the consumer is required to incur under the terms of that contract, including conditions which will subsequently prove unfair and non-binding to the consumer. Today's judgement is confirmed by the TEU in today's justification.

Bottom line: The CJEU has consistently stressed that the incorrect indication of the value of the RRSO in the credit agreement deprives the consumer of an estimation of the value of the cost of the debt and of the choice of an appropriate and, in particular, the cheapest offer, which constitutes a breach of his rights and may lead to the free credit penalty.

Second, the TEU confirmed that the agreement should clearly and clearly describe the conditions for modifying the fees associated with its implementation. The fact that for this intent the contract is based on indicators that are hard for the consumer to verify may violate the information obligation. These infringements happen erstwhile the consumer cannot verify or influence the circumstances justifying the change, and thus cannot realize the scope of his obligation.

Comment: The justification for the judgement states that the request to present the terms of the consumer credit agreement in a clear and concise manner is essential to enable consumers to know their rights and obligations. A good knowing by the consumer of the terms and elements of the consumer credit agreement is essential for the appropriate performance of this contract. These elements besides specify consumer rights. The information provided in the credit agreement must so be without any inaccuracies so that the consumer is correctly informed of his rights, but besides of his obligations. Any component which may mislead the consumer as to the scope of his rights and obligations may be regarded as an unfair practice of the bank.

In summary,: the consumer credit agreement should be transparent, indicate the reasons and manner for changing the fees related to the service provided, so that the consumer can foresee, on the basis of clear and understandable criteria, any changes to those fees. This besides refers to the conditions and charges relating to the implementation of the consumer credit agreement, which may change over time. Failure to supply transparent guidance on the basis of which they may be modified may mislead the average consumer. Conditions and indicators which are hard for the consumer to verify before and during the conclusion of the contract lead to a breach of the information work laid down in that provision, provided that this indication may undermine the consumer’s ability to measure the scope of his obligation.

ThirdAccording to the CJEU, if a breach of an information work makes it hard for the consumer to measure its obligations, the bank may lose the right to interest and additional charges, and the final decision on the substance will be taken by the national court.

Comment: In the present case, the national court had doubts as to whether depriving the bank of interest, commissions and another additional charges would comply with the rule of proportionality. In ongoing litigation, the most common argument of the bank is that the sanctioning of free credit is besides severe and incompatible with the rule of proportionality. The TEU has sided with consumers and has clearly stressed that the choice of sanctions has been left to associate States. Those penalties should be effective, dissuasive and proportionate. The sanction should be proportionate and appropriate to the scale of the infringements. The CJEU points out that it is for the national court to interpret national law and examine whether, in the light of the circumstances of the case, the application of free credit sanctions is justified. On the another hand, the TEU can supply clarifications and guidance to the national court.

Proportional scope of free credit sanctions. The referring court considers that the conditions justifying an increase in the fees related to the implementation of the credit agreement in question are irrelevant to the consumer erstwhile concluding the contract, since the first amount of these costs proves to be comparatively low compared to the amount of credit granted. On the another hand, the TEU has consistently stressed that the creditor's breach of an work of crucial importance in the context of Directive 2008/48 may be subject to national sanctions to deprive that creditor of his right to interest and costs. Of course, the sanctioning of the free credit has serious consequences for the creditor, but it can be regarded as disproportionate only in the absence of an indication or incorrect indication of elements which, by their nature, cannot affect the consumer's ability to measure the scope of his obligation. It is essential to present the conditions under which there may be a change in the fees related to the performance of the consumer credit agreement as it affects the assessment of the scope of consumer obligations. This has economical consequences for the consumer, even if the first amount of these charges is comparatively low compared to the amount of the credit in question.

Consequently, the rule of proportionality does not preclude a associate State from providing for a uniform sanction to deprive the creditor of the right to interest and costs for breaching the various information obligations provided for in Article 10(2) of Directive 2008/48, although the individual gravity of the infringement of each of those obligations and the consequences resulting therefrom for the consumer may vary as the case may be.

Conclusion for the Polish credit market

On the Polish marketplace of credit agreements, we most frequently encounter the deficiency of any information concerning the calculation of the RRSO value. On the another hand, in those agreements where they appear to a limited extent, consumers themselves are incapable to verify the values of the RRSO due to deficiency of expertise.