On the 26th of March 2020 the
CJEU decided on the Mikrokasa case (in French, here). The case concerns a contractual clause on the
calculation of the total costs of a credit agreement under the regimes of the
Consumer Credit Directive and of the Unfair Terms Directive.
The facts of the case:
In November 2016, the
consumer concluded a credit agreement with IPF Polska (who later passed the
credit onto Revenue). The credit amount was 3 000 Polish zlótis
(around 703 euros), payable until May 2018. According to this credit agreement,
the consumer had to pay a commission of 2 084 PLN (around 488 euros).
Besides, the consumer must pay 10% annual interest on the total amount of
248 PLN (around 57 euros). In December 2016, the same consumer concluded another
credit agreement with Mikrokasa for the amount of 4000 PLN (around 940 euros),
payable until June 2019. Additionally, the consumer was obliged to pay 600 PLN
(around 139 euros) in preparatory fees and 3 400 PLN (around 790 euros) in
administrative fees. Besides, the consumer had to pay 7% annual interest on the
total amount of 371,87 PLN (around 86 euros). The consumer did not pay the
total amount owed in either contract.
The first question:
In Polish national law, the
consumer is made aware of the ‘total cost of the credit excluding interest’. The
contractual clause in question, although trying to limit the costs imposed on
the consumer, indicates that the total cost of the credit excluding interest
should not exceed 55% of the total annual amount of the credit, 85% if for 2
years, and 100% regardless of the duration of the credit. The concept of ‘total
cost of credit excluding interest’ does not exist in the Consumer Credit
Directive, which refers multiple times to an idea of totality of costs
(including taxes and other fees). The national court questions the conformity
of applicable national law with the Consumer Credit Directive (considering its
maximum harmonization), since national legislation introduces the concept of
‘total cost of the credit excluding interest’. Furthermore, according to Polish
national law, the ‘total cost of the credit excluding interest’ is determined
according to a formula that does not take into account the installments
actually performed, which means that the consumer does not know the real costs
of the credit and is not duly informed at the time of the conclusion of the
contract (paragraph 29). The national court therefore asked the CJEU whether
the Consumer Credit Directive (and its goals) should be interpreted as being
incompatible with separating the Polish national law notion of ‘total cost of
the credit excluding interest’ from the Directive notion of ‘total cost of the
credit for the consumer’.
The CJEU’s argumentation:
The CJEU correctly
highlights that the legislator provides a broad definition of the concept of
‘total cost of the credit for the consumer’ in Article 3(g), which encompasses
all costs that the creditor knows of (excluding notarial fees). According to
the Court of Justice, the ‘cost of the credit excluding interest’ is a
subcategory of ‘total cost of the credit’ as defined by Article 3(g) of the
Consumer Credit Directive. Furthermore, the CJEU highlighted that Article 5(1)
and Article 10(2)(g) regarding pre-contractual information in a credit
agreement state that the consumer must be informed of the ‘total amount payable
by the consumer’ as meaning the ‘the
sum of the total amount of the credit and the total cost of the credit to the
consumer’ (as defined in Article 3(h)). The CJEU also states that these
provisions do not prescribe a duty to inform on the cost of the credit
excluding interest or its calculation method and that, therefore, this issue is
not harmonized (paragraph 41-42). The CJEU concludes that Polish national law
merely establishes a maximum limit for the total credit cost and its
calculation method, as well as the consequences of non-performance. As long as
national law does not impose supplementary duties to inform (which is up
to the national court to verify), there is no contradiction between
national law and the Consumer Credit Directive.
The second question:
Regarding the contractual
clause in question, the national court states that in practice professional
parties choose the maximum amount allowed, without taking into account the
costs actually incurred in by the consumer (paragraph 32), which could mean
that the clause is unfair. However, the national court had doubts as to whether
this contract term is imposed by Polish national law, in which scenario it
would be excluded from the scope of the Unfair Terms Directive (Article 1(2)).
Therefore, the national court asked whether the Unfair Terms Directive excludes
from its scope contractual clauses that determine the total cost of the credit
excluding interest while respecting the maximum limit prescribed by national
law, without considering the costs that were actually incurred in by the
consumer.
The CJEU’s argumentation:
Regarding the second
question, the Court of Justice reminds that the Unfair Terms Directive is not
applicable to contractual terms that are imposed by national legislation (or
regulation), as long as such a provision is mandatory, that is, that it applies
regardless of the contractual parties’ choice or as a default rule (paragraph
50). This exclusion from the scope of the Unfair Terms Directive is to be
interpreted in a strict way, so as to provide consumers with a high level of
protection (paragraph 51). As the CJEU repeatedly says, the evaluation of
whether the contractual clause results from national law and whether it is a
mandatory provision is to be made by the national courts. However, the CJEU
conducts that evaluation itself, and states it does not appear that a contract
term that applies a calculation method to the maximum limit of the cost of the
credit excluding interest results from the relevant national provision in this
case, given that that provision does not establish the rights and duties of the
parties but simply restricts the freedom to determine the cost of the credit
excluding interest above a certain level, which does not seem to prevent the
national judge to assess the unfairness of the clause. The CJEU concludes that
the Unfair Terms Directive does not exclude from its scope a contract
term that determines the cost of the credit excluding interest which respects
the maximum limit imposed by national legislation, without necessarily taking
int account the costs actually incurred in by the consumer.
Remarks:
While I understand the
argumentation of the CJEU regarding the first question, not only does it not
offer a high level of consumer protection but also it does not represent the
spirit of the Consumer Credit Directive. The CJEU should have further
emphasized the goals of the information duties in the Consumer Credit
Directive, especially considering that the referring court highlighted that
‘the consumer does not know the real costs of the credit and is not duly
informed’. The Consumer Credit Directive
– and other consumer instruments at EU level – are very clear on the fact that
the information on the total price of the product or service to be acquired
must be complete, all-encompassing and final (whenever possible). One of the main goals of the Consumer Credit
Directive is to increase transparency regarding contract terms and to guarantee
that the consumer is aware of the economic consequences the credit agreement
entails, both before the conclusion of the contract and throughout the
performance of the contract. See, for example, Recital 19 (‘In order to enable consumers to make
their decisions in full knowledge of the facts, they should receive adequate
information, (…) on the cost of the credit and on their obligations’). This is
particularly true when it comes to the justification behind imposing specific
duties to disclose the total cost of the credit. See, for example, Recital 43
(‘In individual Member States different cost factors are taken into account in
the calculation thereof. This Directive should therefore clearly and
comprehensively define the total cost of a credit to the consumer’). What the CJEU is saying is
that it is acceptable to insert a term on the calculation of the total price of
the credit excluding interest (and not considering actual performances,
therefore preventing the consumer from knowing the actual cost of the credit
excluding interest…), as long as there is no explicit obligation to inform the
consumers on the matter and as long as the consumers are also informed on all
the aspects covered by the Directive. However, the ratio of the obligation to
inform consumers on the total amount of the credit seems to directly conflict
with this (and not only with an explicit obligation to inform on the total cost
of the credit except interest). A contractual clause establishing a certain monetary amount excluding interest will ‘inform’ the consumers anyway (from a practical perspective). If we take the CJEU's reasoning to the extreme, it
means that it is acceptable to have in the same contract several concepts (or
clauses) that fall under the concept of ‘total cost of the credit’ along with ‘total cost of the credit excluding interest’, such as ‘total cost of the
credit excluding taxes’, ‘total cost of the credit excluding commissions’ and
‘total cost of the credit excluding fees’. The fact that the consumer is aware
of the total cost of the credit does not guarantee that the consumer
understands the information/ economic consequences if he is also informed of
all the other ‘total costs’. As we know, consumer biases and information
overload stand in the way of a clear, concise and understandable credit
agreement. Considering all the research that has been conducted on behavioral
economics and on how consumers perceive and contextualize (pre-contractual)
information and contract terms, it seems strange to allow this, especially when
it seems to contradict the spirit of the Directive.
