Table of Contents:
1. What circumstances related to the APR and the duration of the credit agreement raised doubts for the Slovak court?
2. Should the agreement explicitly specify the loan repayment term as “from” and “to”?
3. What information regarding the APR is the lender obliged to provide?
4. What obligations regarding the APR does the lender have before concluding a credit agreement?
5. Does the type of breach of the information obligation regarding the APR affect the consumer’s right to protection under Directive 2008/48/EC?
A consumer credit agreement must clearly and concisely specify the assumptions adopted by the lender for calculating the APR, and if this information is not provided to the consumer, they may exercise the appropriate sanctions specified in national law – Judgment of the Court of Justice of the European Union of January 23, 2025.
What circumstances related to the APR and the duration of the credit agreement raised doubts for the Slovak court?
In a request dated November 14, 2023, for a preliminary ruling, the Slovak court referred the following preliminary questions to the Court of Justice of the European Union:
- Should Article 10(2)(c) of Directive [2008/48] be interpreted in such a way that the specification in a contractual provision of the duration of the credit agreement:
– explicitly defining the duration of the credit agreement, for example, by indicating the start and end date of the agreement (from… to…), or by using calendar units of time such as months or years (e.g., for a period of one year), or
– is it sufficient if the duration is determined in a way that the consumer can calculate or establish it in another manner based on the terms of the agreement, for example, based on the number of monthly installments or the moment of full repayment of the loan?
- Should Article 10(2)(g) of Directive 2008/48, in the parts stating “in a clear and concise manner” and “all assumptions used to calculate that rate,” be interpreted to mean that:
– the assumptions used to calculate the [APR] must be explicitly designated in the contract as the assumptions used for calculating the APR, or
– the consumer must determine the relevant assumptions for calculating the APR on their own based on the contractual provisions?
Should the agreement explicitly specify the loan repayment term as “from” and “to”?
In response to the first preliminary question, the Court of Justice of the European Union (CJEU), in its preliminary ruling of January 23, 2025, case C-677/23, ruled that a credit agreement does not necessarily have to explicitly state its duration, as long as the contract terms allow the consumer to determine this period easily and with certainty.
This means that compliance with Directive 2008/48 regarding informing the consumer about the contract duration can be achieved, for example, by indicating the number of monthly loan installments along with specifying the payment dates of the first and last installments or by providing a full repayment schedule.
While this first question may not significantly impact national case law—since Polish lenders generally fulfill the obligation to specify the duration of credit agreements—the second preliminary question and the response provided by the CJEU indicate that the judgment in case C-377/23 could directly influence national judicial practice.
What information regarding the APR is the lender obliged to provide?
In response to the preliminary question regarding the APR (Annual Percentage Rate of Charge), the CJEU ruled that the assumptions adopted for its calculation must be explicitly stated in the credit agreement. It is not sufficient for the consumer to deduce them by analyzing the contract terms.
According to the CJEU, the assumptions used by the lender to calculate the APR should be presented in the agreement in such a way that the consumer can verify whether the APR was calculated correctly. While the court did not specify how these assumptions should be disclosed, it emphasized that they must enable the consumer to independently calculate the APR.
It appears that these assumptions should at least include the variables specified in the mathematical formula contained in Annex I to Directive 2008/48/EC. Other methods of providing the necessary data for APR calculation may be acceptable, but they must be clear, concise, and explicitly stated in the credit agreement, in the section dedicated to the APR. Based on the preliminary request, the presentation of the assumptions used for APR calculation may take the form of a summary.
What obligations regarding the APR does the lender have before concluding a credit agreement?
It is also essential to consider other key aspects related to the APR, highlighted by the CJEU. In one of the recitals of its ruling, the court pointed out the pre-contractual obligations of the lender regarding the APR. These obligations are met if the consumer is presented with various variants of a specific credit agreement and their impact on the APR, e.g., in relation to different repayment periods.
Does the type of breach of the information obligation regarding the APR affect the consumer’s right to protection under Directive 2008/48/EC?
Furthermore, in paragraph 59 of the ruling, the CJEU emphasized that an incorrect APR calculation may entitle the consumer to withdraw from the credit agreement and to exercise sanctions specified in national law, in accordance with Article 23 of Directive 2008/48/EC.
By recognizing the consumer’s right to apply sanctions, the CJEU did not limit this right to situations where the APR error is detrimental to the consumer (i.e., when the APR indicated by the lender is higher than in reality). This suggests that, on February 13, 2025, when the CJEU delivers its ruling in the Polish case C-472/23, the nature of the error in the APR disclosure may not affect the consumer’s ability to exercise the right to a free loan sanction.
Complete information for the consumer is key! Attorney Anna Sobczyk spoke to Business Insider about the free loan sanction and lenders’ obligations towards consumers – https://businessinsider.com.pl/finanse/pelna-informacja-dla-konsumenta-to-podstawa-tsue-rozstrzygnie-o-darmowych-kredytach/61kztxw
