In April 2026, the CJEU delivered a judgment in C-744/24 P.W. v Bank Polska Kasa Opieki S.A. This is an interesting case because it tackled the scope and meaning of various cost-related notions in Directive 2008/48/EC on Consumer Credit, as well as the common practice of tying credit products to other products, such as insurance.
The consumer entered into a loan contract for 150 000 zlotys
(PLN) (approximately EUR 34 400), where PLN 133 214.92
(approximately EUR 30 550) was actually paid to the consumer, with
the remaining PLN 16 785.08 (approximately EUR 3 850) being
used to pay for credit insurance, described as ‘voluntary’. Taking out that
voluntary insurance reduced the interest rate. The consumer paid a total of
PLN 207,073.53 (approximately EUR 47,500); the total cost of the
credit was PLN 73 858.61 (approximately EUR 16 950). That
cost included interest of PLN 57 073.53 (approximately
EUR 13 100) and an insurance premium of PLN 16 785.08
(approximately EUR 3 850). The interest rate was 8.49% per annum
(comprising a base rate of 4.36% and a margin of 4.13%). That interest rate was
applied to the amount actually paid to the consumer under the contract, plus
the insurance premium. The APR stated in the credit agreement was 12.57%. The
term of the agreement was set at 96 months.
The consumer disputed the correct calculation of the APR and started an
action before the Sąd Rejonowy we Włodawie (District Court, Włodawa,
Poland); which asked the CJEU:
Is Article 3(g) and (j) of Directive 2008/48, read in conjunction
with Article 10(2) of that directive, must be interpreted as precluding
the inclusion, in consumer credit agreements, of terms providing for the
application of the interest rate not only to the total amount of the credit but
also to sums allocated to the payment of costs associated with that credit and
which, as a result, form part of the total cost of the credit to the consumer. In other words, whether the rate of interest can be
applied to other components of the cost structure (forming part of the total
cost of credit) rather than the total amount of credit.
The dispute therefore raised the question of the regime of non-interest
costs, or as introduced in the applicable Polish law, ‘cost of credit excluding
interest ’, such as the insurance premium in question.
Under Article 3(g) the total cost of the credit to the consumer means all
the costs, including interest, commissions, taxes and any other kind of
fees which the consumer is required to pay in connection with the credit
agreement and which are known to the creditor, except for notarial costs; costs
in respect of ancillary services relating to the credit agreement, in
particular insurance premiums, are also included if, in addition, the
conclusion of a service contract is compulsory in order to obtain the credit or
to obtain it on the terms and conditions marketed. Under Article 3(g),
therefore, all costs in question are part of the total cost of credit,
including non-interest costs such as the insurance premium. Although labelled
as voluntary, because it provided access to a better rate, it directly falls
under the components of the total cost of credit (see para 41). It is also
important that the CJEU noted that it does not matter what sum was actually
paid to the borrower. The fact that the insurance premium was not first
transferred to the borrower, who would then transfer it back to the bank, does
not affect the definition of the total cost of credit. The insurance premium,
therefore, was part of the total cost of credit. Under Article 3(i), the total
cost of credit is expressed as an annual percentage. The APR
‘means the total cost of the credit to the consumer, expressed as an annual
percentage of the total amount of credit, where applicable, including the costs
referred to in Article 19(2)’.
The CJEU then further analysed other concepts in the Directive. Under
Article 3(l) the total amount of credit means 'the
ceiling or the total sums made available under a credit agreement'; whereas under article 3 (h) total amount payable by the consumer ‘means the sum of the total amount
of the credit and the total cost of the credit to the consumer ', whereas under
Article 3(j) the borrowing rate is the ‘interest rate … applied …
to the amount of credit drawn down’. The CJEU noted that the total amount of
credit and the amount of the credit drawdown designate the sums made available
to the consumer, which excludes those used by the lender to pay the costs
connected with the credit concerned and which are not actually paid to the
consumer (para 55).
Based on this and referring to its earlier practice, the CJEU concluded
that the concepts of total amount of credit and total
cost of the credit are mutually exclusive and
that, consequently, the ‘total amount of credit’ cannot include any of the sums
forming part of the ‘total cost of the credit’ to the consumer (para 53).
Consequently, ‘none of the sums intended to cover the agreed commitments under
the relevant credit concerned – such as administrative costs, interest,
commissions and any other type of charge which the consumer is required to
pay – may be included either in the total amount of credit, within the
meaning of Article 3(l) and Article 10(2) of Directive 2008/48, or in
the amount of the credit drawdown within the meaning of Article 3(j) of
Directive 2008/48 (para 57). That
also applies to insurance costs (para 57).
The CJEU ruled that Article 3(g) and (j) of Directive 2008/48/EC,
read in conjunction with Article 10(2) of that directive, must be
interpreted as precluding the inclusion, in consumer credit
agreements, of terms providing for the application of the interest
rate not only to the total amount of the credit but also to sums
allocated to the payment of costs associated with that credit and which, as a
result, form part of the total cost of the credit to the consumer. In
short, the CEU ruled that interest cannot be applied to the payment of the sums
that are used to cover insurance premiums and other costs of credit.
This is an important ruling that addressed the frequent practice of banks
to condition one product on another. This practice of tying and bundling is now
addressed in the new Directive 2023/2225 on Consumer Credit, which enters into
force on November 20 2026. The ruling remains relevant as it deals with the
regime of costs associated to such practices. The ruling is also relevant to
other non-interest costs associated with the loan. Although these are part of
the total cost of credit and are part of the APR, they cannot be part of a
basis on which the interest is calculated on. The interest rate, based on the
judgment, can only apply to the what falls under the total amount of credit,
the actual sum made available by the creditor to the consumer.
