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Right of withdrawal in consumer credit agreements: a mere cross-reference is not enough

Europe
08/04/2020
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In 2012, a consumer entered into a credit agreement with the bank Kreissparkasse Saarlouis. The credit agreement granted the borrower a right of withdrawal of 14 days and furthermore stated that this period would only start after (i) the conclusion of the credit agreement but not before (ii) the borrower had received all the “mandatory information required by the German Civil Code”. However, such “mandatory information” was not included in the credit agreement itself.

On 30 January 2016, the borrower notified its bank that it wished to exercise its right of withdrawal from its contractual commitment to the credit agreement. In response, the bank informed the borrower of the expiry of the right of withdrawal period.

The question arising in case C-66/19, which was referred to the Court of Justice of the European Union (the “CJEU”) for a preliminary ruling, was whether the reference to a provision of the German Civil Code (which itself referred to other provisions of the Code) in the credit agreement satisfies the requirement, as regards the mandatory information to be given to the borrower pursuant to Directive 2008/48 on credit agreements for consumers (the “Directive”), that the credit agreement must state “clearly and concisely” the existence or absence of a right of withdrawal and the arrangements for exercising that right.

The CJEU considered that a cross-reference to national provisions does not offer a high level of protection to consumers as provided for by the Directive. Furthermore, the CJEU inferred, from the fact that the borrower could not find the relevant information in the credit agreement, a breach of the requirement that the consumer be provided with clear and precise information (in this case, specifically regarding the right and period of withdrawal).

This decision is a reminder to all consumer credit lenders of the importance of providing clear, complete and accurate information to the consumer, in particular on their right of withdrawal.

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