Playing the “withdrawal card“ yet again?

On 9 September 2021, the European Court of Justice (ECJ) delivered a judgment on the Consumer Credit Directive (Directive 2008/48/EC – “CCD”) which has received widespread public attention. The judgment is said to enable consumers to withdraw from their credit agreements even years after entering into those agreements. Some consumer advocates even talk about a comeback for “playing the withdrawal card” and predict a new “wave of withdrawals”.

Reasoning of the ECJ ruling

In its judgment of 9 September 2021, the ECJ decided specifically on the interpretation of Art. 10 CCD which stipulates the information to be included in credit agreements with consumers. The interpretation and exact scope of this provision is relevant as the consumer’s 14-day withdrawal period starts to run only on the day on which the consumer receives the information required by Art. 10 CCP in a “clear and concise manner” (cf. Art. 14(1) CCP).

The ECJ’s decision is considered to be important in particular because the ECJ interprets the scope of the information required by Art. 10 CCP differently from how Germany’s Federal Court of Justice (Bundesgerichtshof) interprets the corresponding provisions of German law which implement Art. 10 CCP. This applies, for example, to the information on the interest rate for late payment (cf. Art. 10(2)(l) CCP/Art. 247(6)(1), section 3(1)(11) of the Introductory Act to the German Civil Code (EGBGB)). Another example is the exact content required by the information on access to out-of-court complaint and redress mechanism for consumers (cf. Article 10(2)(t) CCP/ Art. 247(7)(1)(4) EGBGB).

Furthermore, the ECJ follows from Art. 14(1) CCP that the creditor cannot neither rely on the concept of forfeiture not on the concept of abuse of rights (as understood unter EU law) if the information to be included in credit agreements is not included in the credit agreement or duly communicated later on. The Federal Court of Justice, on the other hand, has regularly allowed the plea of forfeiture as a defence against a consumer’s (otherwise valid) withdrawal if at the time of the withdrawal the loan had been fully repaid and any existing security had been released (cf. FCJ, decision of 23/1/2018 – XI ZR 298/17). In the past, the FCJ has also not considered it necessary to refer this question to the ECJ for a decision (cf. FCJ, decision of 3/3/2020 – XI ZR 189/19).

Consequences of the ECJ ruling

It is doubtful whether the ruling by the ECJ has indeed the effect that consumers can – as claimed by consumer advocates – withdraw from millions of credit agreements. To the contrary, for the time being, the ECJ ruling has no direct effect. It is now up to the German courts, especially the Federal Court of Justice, to decide whether and to what extent German national law can or cannot be interpreted in accordance with ECJ’s interpretation of Art. 10 CCP. The results of those decisions remain to be seen.

In addition, it should be kept in mind that the ECJ ruling seems to be relevant only for credit agreements with consumers that are not secured by mortgages. This is because the Consumer Credit Directive does not apply to credit agreements secured by mortgages and because the Federal Court of Justice has so far refused to extend its jurisprudence on credit agreements which are not secured by mortgages to credit agreements which are (cf. FCJ, decision of 7/5/2020 – XI ZR 581/18, para. 3).

Regardless of this, it is doubtful whether the ECJ’s ruling is indeed as promising for consumers as is publicly claimed, as withdrawing from the contract should not result in a financial benefit:

• If the credit agreement is linked with the contract for the purchase of a car, German law requires the borrower (=consumer) to perform first. In other words, he or she can only demand repayment of instalments from the creditor once he or she has returned the vehicle to the creditor. Moreover, borrowers are not entitled to compensation with respect to the instalments they have paid. In addition, they are obliged in principle to reimburse the creditor for the car’s loss in value.
  
  
• If the credit agreement is not linked with the contract for the purchase of a car, the borrower, in accordance with the provisions of German national law, owes the creditor the repayment of the loan as the payment of the interest contractually agreed upon until the point in time the loan has been repaid..

Outlook

The ECJ ruling clearly shows that the discussion about the consumer’s right of withdrawal is no longer limited to the withdrawal information, but increasingly extends to the other information to be included in the credit agreement. Since the information to be included in the credit agreement is based on the requirements of the Consumer Credit Directive, it is always essential to bear in mind those requirements when dealing with or aiming to avoid (future) legal disputes.