Slovakia, District Court Dunajská Streda, 13 January 2017 15C/62/2014

Identification of the case

• Consumer protection (art. 38 CFREU)
• Right to an effective remedy and to a fair trial (art. 47 CFREU)

• Law No. 129/2010 on consumer credit and other forms of credit and loans for consumers (paragraphs 9 and 11)
• Slovakian Civil Code (paragraphs 40 and 46)
• Slovakian Commercial Code (paragraph 273)

• Directive 2008/48/EC on credit agreements for consumers (paragraphs 1, 3, 10, 22, 23)

Summary of the case

On 29th June 2011 Home Credit Slovakia - as lender - concluded a credit agreement with Ms. B., as borrower. The credit agreement was drawn up on the basis of a standard form, which contained information concerning, inter alia, the borrower’s personal data and employment and the regulation of the loan itself, together with its main drawdown. In addition, the credit agreement provided that the document headed “Credit agreement terms of Home Credit Slovakia” was incorporated into the agreement. The borrower signed only the standard form; by that signature, she also confirmed to have received the general terms and conditions, which were thus not separately signed by the parties.

Since Ms. B. stopped repaying the loan granted after two monthly instalments, Home Credit Slovakia brought an action seeking to recover the loan in full, interests and late payment penalties included. On her part, the defendant questioned the validity of the credit agreement, since: (i) general terms and conditions had not been separately subscribed, while Slovakian law provides the written form for every part of the agreement; (ii) pre-contractual information submitted by the claimant was incomplete, since the standard form did not contain all of the compulsory information listed in Article 10(2) of the Directive 2008/48.

• Civil judicial enforcement

Declaration of voidness of the credit agreement;

Declaration of voidness of certain contractual terms of the credit agreement;

Creditor’s forfeiture of entitlement to interests and charges pursuant to par. 11(1) of Law No. 129/2010.

The referring Court asked the CJEU several questions concerning:

• the interpretation of Article 10, which provides the form of the credit agreements and the information to be included in it [questions (1) to (6)];
• the interpretation of Article 23, which reserves to Member States the choice of possible remedies in case of infringements of the national provisions adopted pursuant to the Directive [question (7)].

As regards penalties, the Court asked the CJEU the following question:

(7) “Must the provisions of Article 1 of Directive 2008/48, under which the directive seeks full harmonisation in the field concerned, or Article 23 of the directive, which requires that penalties be proportionate, be interpreted as precluding provisions of national law under which failure to provide most of the information required in a credit agreement by Article 10(2) of the directive has the consequence that the loan granted is deemed to be interest-free and free of charges, so that the borrower is obliged to repay the lender only the capital sum received under the agreement?”

The Court first answered all the questions of the referring Court concerning the interpretation of Article 10(1) and (2) of Directive 2008/48, with reference to the form of the credit agreement and its mandatory contents.

To this respect, the Court set out the following rules.

Interpretation of Article 10(1) e (2):

• “a credit agreement need not necessarily be drawn up in a single document, but all the information referred to in Article 10(2) of the directive must be set out on paper or on another durable medium”
• “it does not preclude a Member State from providing in its national legislation, first, that a credit agreement falling within the scope of Directive 2008/48 which is drawn up on paper must be signed by the parties and, second, that the requirement that the agreement be signed applies to all the details of that agreement referred to in Article 10(2) of that directive”

Interpretation of Article 10(2)(h) and (i):

• “credit agreement need not indicate the specific date on which every payment to be made by the consumer falls due, provided that the terms of the agreement allow the consumer to ascertain the dates of those payments without difficulty and with certainty”.
• “a fixed-term credit agreement, providing for amortisation of the capital in consecutive instalments, need not state, in the form of an amortisation table, the part of each instalment that will be allocated to repayment of capital. Those provisions, read in conjunction with Article 22(1) of that directive, preclude a Member State from imposing such an obligation under national law”.

As regards the interpretation of Article 23, the Court underlined the last part of this provision, which states that penalties chosen by Member State in case of infringement of Directive provisions must be effective, proportionate and dissuasive.

Recalling the previous judgement LCL Le Credit Lyonnais (C- 565/12, decision of 27th March 2014), the Court than held that:

“the severity of penalties must be commensurate with the seriousness of the infringements for which they are imposed, in particular by ensuring a genuinely deterrent effect, while respecting the principle of proportionality”.

With reference to the provisions laid down in Directive 2008/48, the Court thus stated that the obligation to include in a credit agreement information such as the annual percentage rate of charge and the number and frequency of payments (included in Article 10(2) of the Directive) constitutes a vitally important obligation. Accordingly, the failure to include such information in a credit agreement “may compromise the ability of a consumer to assess the extent of his liability”. As a consequence, the penalty - laid down under nation law - of forfeiture by the creditor of entitlement to interest and charges may be considered to be proportionate.

Therefore, the Court ruled that:

“Article 23 of Directive 2008/48 must be interpreted as not precluding a Member State from providing, under national law, that, where a credit agreement does not include all the information required under Article 10(2) of the directive, the agreement is deemed to be interest-free and free of charges, provided that the information covers matters which, if not included, may compromise the ability of the consumer to assess the extent of his liability.”

Role of the Charter and role of the general principles on enforcement

The Charter is not explicitly referred to, neither by national courts nor by the CJEU. However, the right of the consumer to an effective remedy is driving the CJEU reasoning.

• Right to an effective remedy before a tribunal

Although no explicit reference is made to Charter provisions, in its Home Credit judgement the Court interpreted the goal of consumer protection in line with Articles 38 and 47 of the Charter, which guarantee the right to an effective remedy in consumer cases.

• Effectiveness
• Proportionality
• Dissuasiveness

The Court indirectly refers to the principle of effectiveness in its reasoning, insofar as it interprets Article 23 of Directive 2008/48, which explicitly states that penalties provided by Member State must be effective.

Although not directly, the principle of dissuasiveness is considered insofar as, by recalling the LCL Le Crédit Lyonnais judgement, the Court stressed the relevance of the “deterrent effect” that penalties provided by Member States shall produce.

In its reasoning, the CJEU explicitly relied on the proportionality principle. First of all, the CJEU recalled its previous case-law (LCL Le Crédit Lyonnais, C 565/12), stating that “the severity of penalties must be commensurate with the seriousness of the infringements for which they are imposed, in particular by ensuring a genuinely deterrent effect, while respecting the general principle of proportionality”.

Elements of judicial dialogue

• Direct dialogue between CJEU and National court (preliminary reference)

Preliminary reference

Conform interpretation with EU law as interpreted by the CJEU

To assess the conformity of national law to European law.

Additional notes on the decision

In Italy, a recent decision of the Banking and Financial Arbitration Committee recalled the CJEU Home Credit case in order to justify the validity or Article 125-bis TUB (Testo Unico Bancario), whose provisions are very similar to the Slovakian ones (Arbitro bancario finanziario sez. collegio di coordinamento, 8.6.2018, n. 12832).