Earlier this month (on the 14th of February) Advocate General Kokott delivered her Opinion in case C-58/18 Michel Schyns v Banifius Banque SA, a request for preliminary ruling by the Belgian Justice de Paix du canton de Visé on the interpretation of Directive 2008/48/EC on Consumer Credit.
The facts of the case
The facts of this case are somewhat confusing and there is not enough information in the Opinion to fully understand what had happened. For understanding the legal issues involved, it is sufficed to say that in 2012 Mr Schyns concluded a contract with Home Vision for the installation of a photo-voltaic system (i.e. a solar power system) for the price of 40 002 euros. A couple of days later, Mr Schyns concluded a loan contract with the predecessor of Banifius Banque SA for 40 002 euros repayable in the next ten years in monthly installments of 472,72 euros. The loan was issued to Mr Schyns who subsequently transferred it to Home Vision. The photo-voltaic system was never installed, and Home Vision subsequently declared bankruptcy. In 2016 (after paying the installments for over 4 years) Mr Schyns commenced an action against the bank for setting the contract aside and terminating future performance.
The legal issues
The case raised interesting issues on the compatibility of Belgian law with the Directive. These involved the interpretation of Art. 5(6) of the Directive on the meaning of 'adequate explanations', in particular in the light of Art. 8 of the Directive, the creditors duty to lend responsibly.
1) In the first instance, the issue was whether the Belgian law requiring creditors to select a credit product suitable to the needs and the financial situation of the consumer is contrary to Art. 5(6) of the Directive; and whether the national law requiring creditors to deny the loan to consumers that cannot afford the loan is contrary to the requirement of Art. 5(6) of the Directive.
1) In the first instance, the issue was whether the Belgian law requiring creditors to select a credit product suitable to the needs and the financial situation of the consumer is contrary to Art. 5(6) of the Directive; and whether the national law requiring creditors to deny the loan to consumers that cannot afford the loan is contrary to the requirement of Art. 5(6) of the Directive.
2) linked to the above questions, the referring court sought guidance on whether responsibility for the suitability of the loan lies on the creditor.
The scope of Art. 5(6) of the Directive
AG Kokott proposes a negative answer to the first question; that it is not contrary to Art. 5(6) of the Directive to require creditors to provide tailored financial advise to consumers. The AG rightly recognized that selecting the right credit product would amount to regulated activity of financial advise as opposed to the more generalized provision of financial information that is not regulated. Referring to earlier case-law the AG emphasised that it is ultimately the consumers obligation to choose a credit product that suits his/her needs and financial situation, even though consumers might require help in making this decision. However, given that the relevant rule does not take away the freedom of making the final decision, a freedom of choice from consumers, accepting the Belgian Government's submission AG Kokott concludes that it would be within the scope of Art. 5(6) of the Directive to provide for this obligation.
Rejecting a the argument of the bank, that Art. 8 of the Directive only provides for an obligation of the creditor to advise consumers not to take the loan if based on creditworthiness assessment the bank is of the opinion that the consumer cannot afford the loan, AG Kokott suggests that the rules requiring the creditor to refuse to lend under the circumstances are in compliance with Art. 5(6) of the Directive. According to AG Kokott, this interpretation is supported by the purpose of Art. 8(1) of the Directive to ensure responsible lending and with broader EU consumer policy reflected in Art. 18(5) of Directive 2014/17/EU that directly provides for an obligation to refuse to lend.
Who bears the ultimate responsibility for the taken loan?
The second question of the Belgian court is very interesting; it seeks clarification on whether the creditor is ultimately responsible for making sure that consumers are not getting loans that they cannot afford. Unfortunately, the AG does not answer the question sufficiently. She somewhat vaguely suggests that the creditor cannot always bear the ultimate responsibility pointing onto her overall analysis, that would in fact signal that the ultimate responsibility is rather on the consumer than on the creditor.
Our evaluation
This case raises important points for the interpretation of the Directive, touching on exactly those areas/provisions that remain unclear in the Directive. The guidance provided by AG Kokott is sufficiently protective to the interests of the consumers; perhaps except for the answer to the second question that could have been more developed and the message clarified. Sadly, since under the applicable Belgian law the rules on linked transactions are inapplicable to the present facts of the case, the opinion does not extend to discussing Art. 15 of the Directive.
Unfortunately, the submission of the national court is quite vague in terms of explaining the facts and the applicable national law to an extent that it would make the CJEU unable to hear the case. In the light of these circumstances, AG Kokkot proposes inadmissibility of the claim. We nevertheless hope the CJEU will hear the case to deliver valuable interpretation on the issues discussed above.
