Thursday, 12 July 2012

Less than full harmonisation of consumer credits in the EU - CJEU case SC Volksbank România (C-602/10)

12 July 2012: CJEU's case SC Volksbank România (C-602/10)

The Directive on Consumer Credit (2008/48/EC) is still a 'baby' among European consumer protection measures. It had to be transposed by Member States only by 11 June 2010, so it does not surprise that the first cases regarding interpretation of its provisions are reaching the CJEU now. What could give rise to a certain amount of concern is the fact that the judgment seems to undermine the full harmonisation character of this Directive.

A Romanian bank, Volksbank România, demanded from its customers to pay the bank a 'risk charge' equal to 0.2% of the balance of the loan and payable monthly throughout its term. This charge was specified in the standard contract terms of the bank. Romanian consumer protection authorities (CJPC) questioned the validity of this charge and imposed fines on Volksbank for using them. Pursuant to Romanian law which transposed the Directive, the creditor is only allowed to levy certain, specified in the law charges on consumers and a 'risk charge' is not one of them. Volksbank claimed in front of national courts that the national transposition measures are contrary to the Directive.

A few important questions were considered by the CJEU in the light of the full harmonisation character that the Directive introduced (see its article 22(1)).
  1. May a Member State broaden the material scope of application of the Directive to matters excluded from its scope, for example, in order to cover consumer credit agreements secured by immovable properties?
  2. May a Member State broaden the temporal scope of application of the Directive to consumer credit agreements concluded before this law entered into force?
  3. May a Member State prohibit creditors to impose certain charges on consumers even if the Directive does not specify them?
  4. May a Member State allow consumers to have direct recourse to a consumer protection authority, which may then impose penalties on creditors for infringement of national measures without having to use beforehand the out-of-court resolution procedures?
Answer 1
In general, the Directive excludes its application to credit agreements which are secured by a mortgage or by other security on immovable property (art. 2(2)(a) of the Directive). The CJEU explains the full harmonisation character of the Directive as precluding Member States to introduce less or more consumer protection measures than the ones that are provided for in the Directive. (Par. 38) However, recital 10 of the Directive allows Member States to apply provisions of the Directive to other areas which are not covered by its scope. (Par. 40) Since the consumer credit agreements which are secured on immovable property do not fall in the scope of the Directive, the Member States are free to broaden the scope of its application to these agreements. (Par. 42-43)

Answer 2
Article 30(1) of the Directive states that the Directive shall not apply to credit agreements existing on the date when the national implementing measures enter into force. The CJEU concludes, therefore, that consumer credit agreements that were concluded before this new law entered into force, fall outside the scope of application of the Directive. This means that Member States are free to broaden the scope of its application to these agreements. (Par. 53-54)

Answer 3
The CJEU finds that the Directive contains information duty for the creditors pursuant to which they are obliged to inform consumers about bank charges that will form part of the total cost of the credit. However, the Directive does not specify types of charges that the creditor may levy, which means that an exhaustive list of bank charges that can be levied by creditors upon consumers cannot be seen as contrary to the Directive. (Par. 64-65)

Answer 4
Article 24(1) of the Directive requires Member States to ensure that adequate and effective out-of-court dispute resolution procedures are put in place for the settlement of consumer disputes concerning credit agreements. The CJEU does not consider this provision as placing an obligation on Member States to establish these procedures as mandatory, as long as the consumer protection granted by this Directive remains effective. (Par. 94-95) Moreover, consumers should have the widest possible access to the bodies specially set up to defend their interests on account of the risk that consumes will be unaware of their rights or encounter difficulties in exercising them. (Par. 98) The fact that consumers may have direct recourse to consumer protection authorities does not automatically render out-of-court dispute resolution procedures ineffective and therefore a Member State is allowed to provide for such an option. (Par. 99-100)

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