The CJEU was given the opportunity to interpret Directive 2014/17/EU on Mortgage Credit (MCD) in C-85/24 Verein für Konsumenteninformation v BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG. While mortgage loans are a frequent issue infront of the CJEU, the legal interpretation usually turns on Directive 1993/13/EC on Unfair Contract Terms. This is a rare chance, as far as I am aware, there are only two other cases tackling the MCD. While the judgment was delivered last year, it remains relevant, as there is no more recent case on the issue, and the new Directive 2023/2225 on Consumer Credit (CCD2) contains the exact provision in Article 9(2)(e).
The
Austrian bank in dispute offers several credit products to consumers. It
provides general information on the products, including in an information sheet.
The Austrian Consumer Protection Association brought an action against the bank,
asking the court to prohibit the bank from
including, in the information sheet only an example of a variable rate credit
agreement, without also providing an example of a fixed rate credit agreement
and an example of a mixed rate credit agreement, since it offers those three
types of interest rates for those credit agreements. The bank argues that
the information sheet does not seek to provide consumers with detailed
pre-contractual information tailored to individual cases and specific
customers. In its view, it cannot be required that a separate example be
included for every conceivable form of interest rate in that information sheet.
The legal question for the CJEU was whether Article 13(1)(g) of MCD must be interpreted as meaning that a creditor who offers credit agreements, whether or not secured by a mortgage, at a fixed interest rate, at a variable interest rate or with alternating variable interest rate and fixed interest rate periods, must provide a representative example for each of the three types of credit agreements offered?
Article 13 (1) of MCD entitled ‘General information’, provides ‘Member States shall ensure that clear and comprehensible general information about credit agreements is made available by creditors’. Such general information shall include at least the (g) a representative example of the total amount of credit, the total cost of the credit to the consumer, the total amount payable by the consumer and the annual percentage rate of charge.
The CJEU noted that the MCD establishes
a two-level mandatory information system. The first level consists of ‘general information’, referred
to in Article 13 MCD. According to Recital 38, that information
should enable consumers to make their decisions in full knowledge by
‘educating [them] in relation to the broad range of products and services
available and the key features thereof. Consumers should therefore be able at
all times to access general information on credit products available’. The
second level of information consists of the ‘pre-contractual information’ in Article 14
MCD, which includes ‘the personalised information needed [by consumers] to
compare the credits available on the market, assess their implications and
make an informed decision on whether to conclude a credit agreement.’
Thus, the purpose of ‘general information’ is not to provide consumers
with detailed explanations tailored to each type of credit agreement offered
by the creditor and to each individual case; such explanations must be
communicated to them under the ‘pre-contractual information’. They are intended
only to inform consumers in the preliminary stage of their credit search.
The CJEU also addressed the
question of what constitutes a representative example. In that regard, Recital 53
of MCD is helpful. It explains that ‘when determining the representative
example, the prevalence of certain types of credit agreements in a specific
market should be taken into account. It may be preferable for each creditor
to base the representative example on an amount of credit which is
representative of that creditor’s own product range and expected customer
base, as these may vary considerably among creditors.’ The CJEU
then clarified that ‘in assessing the representative nature of the example
to be provided, some factors may be taken into consideration, namely, for
example, the average duration and total amount of credit granted for the type
of credit agreement under consideration and the prevalence of certain types
of credit agreements in a specific market.’ Regarding the annual
percentage rate of charge on the information sheet, the consumer's
preferences and the information provided should, where possible, be taken
into account, and the creditor or credit intermediary should make it clear
whether the information provided is illustrative or reflects the preferences
and information given. In any event, the representative examples should not contravene
the requirements of Directive 2005/29/EC on Unfair Commercial Practices.
Using literal, contextual and teleological interpretations, the CJEU concluded that the practice of creditors who provide different types of credit products is compliant with the requirements of Article 13 Article 13(1)(g) of MCD if they provide by way of general information, only one example of the loans on offer, provided that that example is representative.
