Saturday, 25 May 2019

Early birds and credit costs' repayment - AG Hogan in Lexitor (C-383/18)

Last Thursday, on May 23rd, AG Hogan issued his opinion in the Polish case Lexitor (C-383/18) interpreting mainly Article 16 Consumer Credit Directive. Whilst many cases concerning consumer credit contracts are being referred to the CJEU on the basis of the Unfair Contract Terms Directive, this one relied purely on the framework of the CCD. Namely, consumers in this case decided to repay their credit early. Article 16 CCD regulates early repayment of a consumer credit (within the maximum harmonisation character of the directive). Its paragraph 1 obliges credit providers to reduce total credit costs of consumers in such a situation with 'such reduction consisting of the interest and the costs for the remaining duration of the contract'. The doubts in the case pertained to the interpretation of the notion 'remaining duration of the contract' in this provision. When the consumer credits were granted, credit providers charged consumers with a commission for granting these credits, the amount of which was independent from the duration of the contract. 

The question raised was, therefore, whether consumers paying off their credit early are entitled to the repayment of the part of the commission, proportional to the repayment period, or whether that commission, as a cost that does not depend on the duration of the credit agreement, is outside the scope of credit costs that should be reduced in such cases

Polish courts have differed in their interpretation of the repayment obligation resting on credit providers in such cases (para. 19). AG Hogan notes that there are four possible ways to interpret the phrase 'remaining duration of the contract' (see further on these various interpretations in paras 42-46) and argues that the most simple method of calculation of the reduction in credit costs should be applied, as this was demanded by Recital 39 (para. 52). Recital 39 CCD specifically states that 'the calculation method should be easy for creditors to apply'. AG Hogan advises the Court to recommend the Member States to apply one of the two interpretations (as either would be consistent pursuant to him with the objectives of the CCD) (paras 63-67): 
  • 'the total credit cost must be reduced in proportion to the remaining contract period' (para. 43), with the phrase only specifying the method of calculation of the reduction, or
  • 'the reduction to which the consumer would be entitled corresponds to the one-off or recurring payments not yet fallen due when the early repayment was made' (para. 46). 
Consequently, it would not matter for deciding whether a given fee or cost needs to be included in the reduction following an early credit repayment that it was labelled as not depended on the duration of the credit agreement by credit providers. AG Hogan also does not think that the reduction should be equivalent to the 'amount of expenses saved by the credit institution as a result of the early repayment' (para. 68).  Let us see what the CJEU decides in this case.

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