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(LUXEMBOURG) – Failure by a lender to include all essential information in its credit agreement with a consumer could deprive the lender of entitlement to interest and charges, the EU’s top court has ruled.
The case concerned a Slovakian bank, Home Credit Slovakia, which had granted a consumer a loan of EUR 700 without specifying in the credit agreement certain information relating to the loan, such as the annual percentage rate of charge (APR).
The agreement provided that the lender’s general terms and conditions also formed an integral part of the agreement. By entering into the agreement with her signature, the consumer confirmed having read and understood the general terms and conditions, even though she did not sign a copy of them.
The lady stopped repaying the loan after the first two monthly repayments, following which the bank brought an action against her seeking payment of capital, default interest and late payment penalties.
In its judgment, the European Court of Justice notes that that directive does not require credit agreements to be drawn up as a single document. However, by making reference to another document stated as an integral part of the agreement, that document covering all the consumer’s rights and obligations needs to be on paper or another durable medium and must actually be given to the consumer prior to conclusion of the agreement.
The Court also observes that, even though the directive does not require a credit agreement drawn up on paper to be signed, it does not preclude national legislation which makes the validity of such agreements subject to the requirement that it be signed by the parties, even where that requirement applies to all the documents containing the essential details of the agreement.
Lastly, the Court held that failure by a lender to include in the credit agreement all the information which, under the directive, must necessarily be included in such an agreement may be penalised by Member States by forfeiture of entitlement to interest and charges where failure to provide such information may compromise the ability of a consumer to assess the extent of his liability.
This, said the Court, applies to mandatory information such as the APR, the number and frequency of payments to be made by the consumer, notarial fees and the sureties and insurance required by the lender.
Judgment in Case C-42/15 – Home Credit Slovakia, a.s. v Klara Biroova – case documents
