Yesterday, the ECJ issued its decision in Radlinger v Finway. This decision contributes in several meaningful- albeit not revolutionary- ways to the development of EU consumer law. It also by and large follows the approach suggested by AG Sharpston, whose opinion we had reported on here.
The case concerned a consumer credit secured by a mortgage. The contract foresaw a high interest rate- with all likelihood miscalculated, so that in reality it would be even higher-, several penalties for delay or default and an acceleration clause.
At some point the debtors could no longer pay and filed for personal bankrupcy. When this was declared, they sought to challenge certain terms in the contract as contrary to public morality, which was not allowed under the court's rule of procedure.
The insolvency court posed a series of interesting questions to the Court. Not all of them received an (interesting) answer, but some did.
First, the referring court asked whether its rules of procedure, barring ex officio assessment and restricting the grounds on which the parties could invoke review of the amounts contested, were in line with directive 93/13. The ECJ, extending one more bit its precedents on procedures and unfair terms, established that the rules did not comply with the Directive.
Second, the referring court asked whether ex officio assessment should also extend to whether the obligation to inform provided for by the consumer credit directive has been complied with. The ECJ said ex officio assessment should also cover the respect of this obligation, as well as drawing all the necessary consequences from a finding that the obligation has not been fulfilled. The penalties should be "dissuasive, effective and proportional".
Third, concerning the mandate content of the information to be disclosed, the APR cannot be kept low by incorporating costs to be incurred by the consumer in order to obtain the credit in the "total amount of credit". That these costs exist if the reason why this notion (or the similar notion of "drawdown") is distinguished from the concept of "total cost of credit" in the first place.
Finally, when considering whether certain penalties are unfair under the directive, it is necessary to look at all the potentially applicable fines, irrespective of whether the creditor relies on them. If they are found, as a combination, unfair, all the terms found unfair should be excluded from the contract.
None of these answers come as particularly surprising, as they are all more or less in line with the Court's precedents- of which they sometimes represent a confirmation, in other cases a minor expansion. Even the expansion of ex officio beyond the Unfair Terms directive had already been undertaken (see the ECJ's references to its own precedents at para 62)
Maybe the most interesting thing to be observed is that the referring court had also asked whether something should be said concerning the direct effect of the secondary EU law provisions involved in the controversy, since the final effects of ex officio review would affect a relationship between private parties. The ECJ stressed that ex officio imposes obligations on the courts and not on individuals, thus there is no need to discuss direct effect. That the discovery of ex officio has helped the ECJ bypass the issue of direct effect of Directives between private parties, however, seems hard to deny.