The borrower must be informed

That's the crux of the Thursday TEU judgment. The Court of Justice of the EU has answered the questions referred for a preliminary ruling by the Slovak territory Court in Preszow, but there is no uncertainty that this judgement may have a translation into Polish cases, and the Court of Justice is waiting for the ruling of respective akin questions by the Polish courts.

Annual rate

Slovak questions afraid the explanation of Directive 2008/48/EC of 23.4.2008 on credit agreements for consumers.

They appeared in the case of 2 consumers who made a debt to the Slovak bank, committing in the contract to repay it in 108 monthly instalments. The dates of the first and final instalments were indicated, but they alleged that the agreement did not, however, specify clearly the duration of its validity. Moreover, it does not include assumptions utilized to calculate the actual yearly interest rate (RRSO). Therefore, in the lawsuit, they demanded the annulment of any of the terms of the contract and the uncovering that they were exempt from interest and credit charges.

The national court has asked the Court of Justice of the EU to interpret certain provisions of Directive 2008/48/EC and it has held that a credit agreement does not gotta clearly specify the duration of the credit agreement if its provisions let the consumer to find that period in an easy and safe manner. It is for the national court to find whether that condition has been fulfilled by indicating the date on which the contract starts and ends.

The CSF besides indicated that the assumptions taken to calculate the actual yearly interest rate (RRSO) must be clearly indicated in the contract. It is not adequate for the consumer to be able to identify them himself by examining the terms of the contract.

This information must enable the consumer to verify that the RRSO has been correctly calculated by the bank (the entrepreneur, and in Poland, for example, a debt company), and if it is not correctly established, to assert its rights, in peculiar the right to retreat from the contract. In view of the complexity of the assumptions adopted for the calculation of the RSO, it is essential to clearly, concisely and explicitly indicate them in the contract. The consumer's ability to identify them by reading the individual terms of the contract is not sufficient.

Small borrowers

Let us add that the judgement in question is crucial in peculiar for requirements concerning smaller borrowers (currently to approx. PLN 250 thousand), sometimes besides for Frankowiczs (but alternatively not for loans taken to buy an apartment, only for another purchases or expenses).

– The Court has made it clear that the assumptions to find the percent cost of the loan, i.e. the RRSO, must be clearly and succinctly presented in the contract in order to enable the consumer to verify and measure this cost on its own. The “distribution” of these credit costs across different parts of the contract does not meet this condition and may distort the information that the consumer receives from the bank – comments Wojciech Bochenek, legal advisor, Bochenek, Ciesielski and Partners.

It recalls that various items may be included at the cost of the loan, e.g. interest on paid capital, commissions, preparatory fees, etc. All these costs should be clearly spelled out in the contract.

– present the judgement will besides have a crucial impact on Polish cases and the emerging case law, as an expanding number of consumers are starting to request their rights on the basis of the sanctions on the free debt – adds Mr Bochenek.

File number: C-677/23