CJEU Enhances Consumer Rights: Car Loan Revocations Indefinitely Allowed

• Published date: 03 November 2021
• Subject Matter: Consumer Protection, Consumer Credit, Dodd-Frank, Consumer Protection Act
• Law Firm: Ganado Advocates
• Author: Mr Chris Grech

In a preliminary ruling requested by the Ravensburg Regional Courts in relation to Volkswagen Bank, Skoda Bank and BMW Bank (the "Banks") (Cases C 33/20, C 155/20 & C 187/20) (the "Joined Cases"), the Court of Justice of the European Union (the "CJEU") has delivered a decision aimed at strengthening consumer rights with respect to loan agreements for the financing of cars (the "Loan Agreement(s)"). The CJEU found that if the information contained within loan agreements is not in line with the Consumer Credit Directive (Directive 2008/48) (the "CCD"), consumers may exercise their right of withdrawal from such contract at any time, irrespective of when the loan was originally taken out, as well as be entitled to reimbursement.

By way of background, the CCD aims to harmonise EU rules concerning Loan Agreements to finance consumers' purchases of goods and/or services and to improve the transparency of the terms and conditions in Loan Agreements and the level of consumer protection. The CCD inter alia provides the information which banks, as lenders, must sufficiently explain and disclose to their customers both in the pre-contractual stage and in the loan agreement itself. To this end, the CCD also provides a standard format of consumer credit information which ought to be followed by lenders. Generally, such information includes:

• A description of the credit product;
• the duration of the credit agreement;
• the total credit amount;
• the borrowing rate and terms applicable to this rate;
• the annual percentage rate and the total amount due by the consumer;
• the amount, number and frequency of payments;
• fees related to or resulting from the agreement;
• consequences of late payment and non-performance.

Additionally, Article 14 of the CCD gives the consumer a 14-calendar day window to withdraw from the loan agreement, without having to state a reason for revocation. Moreover, the consumer also has the right to make early repayment of their credit at any time, insofar as the lender, as the creditor, is reasonably and justifiably compensated as per Article 16 of the CCD.

The facts of the Joined Cases were essentially very similar. All applicants had entered into loan agreements with their respective Banks to finance the purchase of a vehicle and after some time, before or after the loan agreement was fully repaid, the applicants decided to revoke their contracts. However, such revocations were refuted by the Banks. Consequently, the applicants filed cases against the...