The right of withdrawal, linked agreements and vehicle purchase contracts- the CJEU in C-143/23

On the 30th of October 2025, the CJEU delivered a judgment in the joined cases of consumers KI and FA against Mercedes-Benz Bank AG and Volkswagen Bank GmbH in C-143/23 , advancing the interpretation of Articles 10 and 14 of Directive 2008/48/EC on Consumer Credit.

 

The consumers entered into a credit agreement with their respective banks to purchase a motor vehicle for private use; where the car dealers from whom the vehicles were purchased acted as credit intermediaries and to whom the loans were paid in directly. The credit agreements did not inlcude the interest rate applicable to late payments at the time the agreement was concluded. Months and years after the contract had been concluded, the consumers notified their banks that they wished to withdraw from their credit agreements, arguing that the standard 14-day period did not begin to run due to omissions in the mandatory information included in their contracts. The referring Landgericht Ravensburg asked several questions to the CJEU.

 

 

The first question addressed by the CJEU was whether the consumers' right of withdrawal began to run despite the absence of mandatory information in their contract. According to Article 14(1)(b) of Directive 2008/48 the 14-day withdrawal period begins to run only on the day on which the information provided for in Article 10 has been received by the consumer, if that day is later than the day on which the credit agreement was concluded. Article 10(2)(l) provided that a credit agreement must state, in a clear and concise manner, the interest rate applicable to late payments, arrangements for its adjustment and any charges payable for default.

 

In its analysis, the CJEU emphasises the importance of mandatory information for consumers' informed decision-making, aimed at helping consumers in a weaker position vis-à-vis the bank. The CJEU then underlined the importance of informing consumers of the specific interest rate for late payment to enable consumers to be aware of the consequences of any late payment, information which is likely to influence not only the consumer’s decision to enter into the agreement, but also their ability to organise the repayment of the loan.

 

In view of the these reasons, the CJEU ruled that Article 10(2)(l) and Article 14(1)(b) of Directive 2008/48 must be interpreted as meaning that the withdrawal period provided for in Article 14(1) does not begin to run until the credit agreement does not specify, in the form of a specific percentage, the interest rate applicable in the event of late payment at the time of conclusion of the agreement, and until such information has been duly communicated to the consumer. With this, the CJEU confirmed its earlier position in C-33/20 (see our analysis here).

 

 

The second question tackled by the CJEU is interesting. The referring court asked directly whether the consumers’ potential intention to abuse their right can be considered here, in particular, that the consumer continues to use the vehicle until the national courts have ruled on the validity of the withdrawal and that the consumer refuses to pay compensation for the loss of value of that vehicle. The CJEU emphasised that a general legal principle is that EU law cannot be relied on for abusive or fraudulent ends. However, in the particular situation, the creditor cannot claim that the exercise of the right of withdrawal is unfair, as the withdrawal period has not, in such a case, begun to run. Under the circumstances, the credit cannot reply on the consumer’s improper exercise of the right of withdrawal provided for in Article 14(1).

 

The third question was what compensation should be provided to the creditor for the use of the vehicle. The CJEU referred to the 14th recital of the Directive, which stated that it was for the Member States to determine the conditions and arrangements following exercise of the right of withdrawal. Directive 2008/48 therefore grants Member States a margin of discretion leaving them to regulate matters relating to the return of the goods financed by the credit, which must follow the principle of effectiveness requiring that national provisions governing the consequences of the exercise of the right of withdrawal do not undermine the effectiveness and efficiency of that right to such an extent that it becomes impossible or excessively difficult to practice to exercise the right.

 

The CJEU, however, emphasised that compensation must be proportionate to the vehicle’s depreciation and its condition at the time of its return. Subject to the verifications to be carried out by the referring court, the CJEU was of the opinion that a method of calculation based solely on the difference in price between the purchase and resale of the vehicle, which includes factors unrelated to the use of that vehicle, such as commercial margins and resale costs – determined unilaterally by the car dealer – as well as value added tax, does not allow for the assessment of the depreciation of that vehicle resulting from its use by the consumer. In particular, if these circumstances are considered regardless of whether the vehicle has not been registered or used before the right of withdrawal is exercised. The CJEU concludes that this method, therefore, appears to impose on the consumer a burden resulting exclusively from the exercise of his or her right of withdrawal, and is likely to result in compensation that is disproportionate to the purchase price of that vehicle, making the exercise of the right of withdrawal impossible or excessively difficult to use in practice.

 

The CJEU ruled that Article 14(1) of Directive 2008/48 must be interpreted as precluding national case-law to calculate the amount of compensation for loss of value owed by consumer to the creditor by deducting from the sale price charged by the dealer at the time of the vehicle’s purchase the purchase price paid by the dealer at the time of the return of that vehicle, provided that that the method of calculation includes factors unrelated to the consumer’s use of that vehicle.

 

Fourth, the CJEU also addressed the question of payment of the interest for the credit agreement, ruling that Article 14(1) of Directive 2008/48 must be interpreted as not precluding national legislation under which a consumer who, after withdrawing from a consumer credit agreement linked to a vehicle purchase agreement, is required to pay the interest provided for in that first agreement for the period between the payment of the loan funds to the seller of the financed vehicle and the date of return of the vehicle to the creditor or seller.

 

Finally, the CJEU explicitly confirmed that Directive 2008/48 must be interpreted as not harmonising completely the rules relating to the consequences of the consumer’s exercise of his or her right of withdrawal from a credit agreement linked to a vehicle purchase agreement.

Going in blind - Consequences of no opportunity to read insurance terms: CJEU in Occidental (C-263/22)

Last week, on 20 April, the CJEU issued a judgment in the case Occidental - Companhia Portuguesa de Seguros de Vida (C-263/22) interpreting further provisions of Articles 3-6 of the Unfair Contract Terms Directive.

By Ryoji Iwata on Unsplash 

The case concerned a bank loan taken by a Portuguese couple, who joined a group insurance contract between the bank and Occidental, an insurance company. Occidental was to guarantee repayment in the event of the consumer's permanent incapacity. When consumer became permanently incapacitated, the insurer refused re-payment, invoking invalidity of the insurance contract due to incorrect and incomplete health declaration by consumer. The insurance contract also excluded from the cover any permanent incapacity resulting from illness that consumers suffered from prior to the contract's conclusion. Consumers claimed, however, that they were never informed about this exclusion clause and that they also did not provide their own health questionnaire to the insurer, as a bank employee completed it for them. 

Portuguese court struggled with two strands approach to the above situation in Portuguese case law, either recognising the insurers' duty to notify policy terms to policyholders or not, and the compliance of the second approach with the UCTD.

Opportunity to read

The first and second questions are interpreted as inquiring about the scope of obligation to create an opportunity to read terms and conditions for consumers. The CJEU reiterates the compliance rules with the principle of transparency, including the need to provide relevant information to consumers before the conclusion of the contract (para 27). Importantly, the CJEU draws attention the fact that with linked contracts (consumers concluding loan and insurance contracts simultaneously) consumers 'vigilance regarding the extent of the risks covered by that insurance contract' will not be the same as when they are concluding loan and insurance contracts separately (para 28). Consumers will need also to have access to all terms of a contract before its conclusion (para 29), regardless whether these are core contract terms (paras 30 and 31), incl. receiving information on 'the specific features of the arrangements for covering the loan repayments' in the event of permanent incapacity to work (para 28). After all, transparency means being able to evaluate economic consequences flowing from the concluded agreement.

To sum up, if consumers did not have access to full terms and conditions prior to concluding the contract, they could invoke UCTD protection against the trader/service provider. Further, the attention drawn by the CJEU to the increased need for transparency when linked contracts are concluded could result in service providers needing to re-evaluate their disclosures in such circumstances.

Consequences of lack of opportunity to read insurance terms on insurance cover

Since consumers had no chance to read the terms of the insurance cover on possible exclusions from the cover's scope, this lack of transparency would weigh in on the evaluation of unfairness (paras 40-41). The CJEU proceeds to outline in details how national court should conduct the unfairness test, i.e. assessing good faith and checking for a significant imbalance in parties rights and obligations to the contract. Importantly, the CJEU draws a conclusion that '(...) by not allowing the consumer concerned to become acquainted, prior to the conclusion of that contract, with the information relating to those contractual terms and all the consequences of the conclusion of that contract, the seller or supplier places that risk, arising from any permanent incapacity, in whole or at least in part, on that consumer' (para 50). If, consequently, the national court would find that consumers would not accept these terms in individual negotiations, then the seller/supplier should be seen as acting not in good faith and the term as unfair (para 51). The term would then be void and not enforceable against consumers (paras 52-53). This legal status  of unfair terms could not be changed by national legislation regulating civil liability of insurers for failure to notify policyholders (para 53). Such a civil liability could be pursued separately by consumers (para 55).

To sum up, the fact that consumers had no opportunity to read the term does not lead to a consequence of that term being automatically void under EU consumer law. This circumstance weighs in though, rather heavily, on the unfairness test. Only when the term is declared unfair, it needs to be considered as void, with all the consequences attributable to this.

The Opinion of AG Kokott in C-58/18 Schyns on the interpretation of Directive 2008/48/EC

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.

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.