If a bank fails to comply with its information obligations in consumer credit agreements, it may be deprived of its right to charge interest and other fees. This applies even if the severity of the violation and its consequences for the consumer varies from case to case.
Background
In a recent judgment published on 13 February 2025, the Court of Justice of the European Union (CJEU) addressed the consequences for banks that fail to comply with their information obligations under consumer credit agreements. The case, Lexitor sp. z o.o. v. A. B. S.A. (Case C 472/23) involved a Polish debt collection company, Lexitor, which had been assigned the rights of a consumer under a loan agreement with a bank. Lexitor claimed that the bank had not fulfilled its obligation to provide necessary information at the time of the contract's conclusion and sought reimbursement of the interest and charges paid by the consumer.
In addition to the amount of the principal sum of that credit, the consumer was required to pay the bank capital interest, a commission. Also, based on the ’tariff’ by the bank, annexed to the original credit agreement, there could be an increase in charges and commissions under specific circumstances and additional administrative charges have been set out with the applicable amounts in the form of a table. The Polish court referred several questions to the CJEU for a preliminary ruling, seeking clarification on the interpretation of Directive 2008/48/EC, particularly regarding the annual percentage rate of charge (APRC), the modification of charges and commissions, and the proportionality of penalties for failing to provide the required information.
Judgement
Firstly, the CJEU emphasized that consumer credit agreements must clearly and concisely state the APRC at the time of the contract's conclusion. However, if certain contractual terms are later deemed unfair, resulting in an increased APRC, this does not necessarily constitute a breach of the bank's information obligations. Secondly, the CJEU highlighted that credit agreements should explicitly and understandably outline the conditions under which associated costs may be modified. If these modifications rely on indicators that are difficult for the consumer to verify, the bank may be in breach of its information obligations. This is particularly concerning if an average consumer cannot assess the circumstances justifying the modification or its impact on costs, making it challenging to gauge the extent of their financial commitment. This can be the case inter alia, the variable economic indicators, including those controlled by the bank itself, and certain other indicators, described in vague terms, referring to legal developments sense.
Lastly, regarding penalties, the CJEU found that if the breach of information obligations prevents the consumer from adequately assessing the extent of their financial commitment, the bank may be deprived of its right to charge interest and charges. The CJEU considers this uniform sanction to be proportionate, although the severity of the breach and its consequences for the consumer may vary depending on the specific case.
Consequences
This ruling underscores the importance of transparency in consumer credit agreements and the potential consequences for banks failing to uphold their legal obligations, including monetary implications for the banks. As a general rule, the CJEU emphasized that consumer credit agreements must be drawn up clearly and transparently for the customers to make informed decisions. As always, the individual case(s) should be assessed and decided by the national courts, but the importance of access to proper information in credit agreements cannot be overstated.
By Balint Zsoldos, Head of Tax, KCG Partners Law Firm
