The Court’s decision followed a request for a preliminary ruling concerning the interpretation of articles 8 and 23 from Directive 2008/48/EC on credit agreements for consumers. (the “Directive”).
The competent court from Czech Republic requested a clarification as to whether the aforementioned articles preclude national legislation (Czech legislation) which specifies that the penalty for failure to fulfil the creditor’s obligation to assess the consumer’s creditworthiness prior to conclude the credit agreement shall be the nullity of the credit agreement triggering the obligation of the consumer to return the principal amount to the creditor within a reasonable term, where such a penalty is, however, applicable only in the event that the consumer invokes it within a three-year limitation period.
Also, it is put into question whether a national court is to apply, ex officio, the nullity, for failure of the creditor to fulfil its obligation to assess the consumer’s creditworthiness, even in the event that the consumer does not actively invoke the nullity.
SHORT SUMMARY OF THE COURT’S DECISION
The Court has ruled that Articles 8 and 23 shall be interpreted as imposing an obligation to the national court to examine, ex officio, whether the creditor fulfilled its obligation imposed by article 8 of the Directive, to assess the consumer’s creditworthiness in the pre-contractual phase.
In addition, it is up to the national courts to decide the penalty imposed in case of creditor’s failure to comply with such an obligation, provided the sanction fulfills the conditions set out in article 23 of the Directive.
With regard to the Czech national legislation, the Court deemed it incompatible with articles 8 and 23 of the Directive, since it has made the application of sanctions to creditors (in case of failure to comply with the obligation to assess the creditworthiness), such as the nullity of the contract linked with the obligation of the consumer to return the principal amount to the creditor within a reasonable term, conditional on raising by the consumer of an objection of such nullity within a three-year limitation period.
CONSEQUENCES OF THE DECISION FOR MEMBER STATES
According to this decision, the Member States have an obligation to revise their national legislation and legal jurisprudence in order for it to be in conformity with the Court’s dictum.
Consequently, national courts can invoke ex officio the non-compliance of the creditor’s obligation to assess the consumer’s creditworthiness, with no intervention from the consumer’s side needed in this regard. The reasoning of the Court took into account, on one hand, the vulnerable position of the consumer when entering into a credit agreement, and, on the other hand, the need for an incentive in order for the creditor to fulfill vigilantly its obligation to assess the creditworthiness of the consumer, thus minimizing the rate of insolvent credits.
Another important immediate consequence was that the EU legislation openly forbids the imposition of restrictions such as that imposed under the Czech legislation, namely the possibility to invoke the nullity of a credit agreement contracted without complying with the obligation to assess the creditworthiness, only within a time-limit of 3 years from the date of the signing of the contract, under the sanction of losing such a right, and thus the creditor remaining without punishment for its breach.
It is important to underline that while it is for the Member States to determine the applicable penalties in cases of non-compliance with the national legislation transposing the Directive, the sanctions should be effective, proportionate and dissuasive.
In Romania, the Emergency Decree no. 52/2016 on credit agreements offered to consumers for immovable property provides for the obligation of the credit institutions to assess the consumer’s creditworthiness before a credit is granted, prescribing the following in article 73: “the creditor cannot invoke the nullity of the credit agreement or modify it in the detriment of the consumer if it is demonstrated that the creditor has not correctly assessed the consumer’s creditworthiness, except for the situation when the wrongful assessment was due to false or incomplete information given by the consumer in bad faith”. It follows, a contrario, that the debtor can invoke the nullity when the assessment was not conducted. The national legislation also provides for a fine in amount of 10.000 lei to 80.000 lei as penalty for failing to comply with the obligation to conduct a creditworthiness assessment by the creditor. This is why, having in view the recent case-law of the Court of Justice of the European Union, which decisions are mandatory, it is considered that such sanctions do not achieve the aim pursued, and the possibility of invoking the nullity of the contract by the consumer agreement linked with an obligation of the consumer to return only the principal amount to the creditor, without any interest, is deemed appropriate in order to determine the credit institutions to fulfill their obligations.