OPR-Finance (Consumer protection - Credit agreements for consumers - Opinion) [2019] EUECJ C-679/18

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(Request for a preliminary ruling from the Tribunal d’instance Épinal (District Court, Épinal, France))

(Request for a preliminary ruling from the Okresní soud v Ostravě (District Court, Ostrava, Czech Republic))

‘Request for a preliminary ruling — Consumer protection — Directive 2008/48 — Credit agreements for consumers — Pre-contractual check of the consumer’s creditworthiness by the creditor — Creditor’s obligations to provide information upon conclusion of the agreement — Penalties in the event of failure to comply — Application of the court’s own motion — National provision which prohibits national courts, on expiry of a limitation period or time bar, from finding and penalising, of their own motion or following an objection raised by the consumer, breaches of obligations’

1. The Cofidis (C‑616/18) and OPR-Finance (C‑679/18) cases are based on French and Czech requests for a preliminary ruling which each concern the interpretation of the Consumer Credit Directive. (2) The key questions are to what extent national time bars and limitation periods preclude a national court from examining infringements of Articles 8 and 10 of the Consumer Credit Directive of its own motion and to what extent courts must impose penalties of their own motion for infringements found by them.

‘Member States shall ensure that, before the conclusion of the credit agreement, the creditor assesses the consumer's creditworthiness on the basis of sufficient information, where appropriate obtained from the consumer and, where necessary, on the basis of a consultation of the relevant database. Member States whose legislation requires creditors to assess the creditworthiness of consumers on the basis of a consultation of the relevant database may retain this requirement.’

3. Article 10(2) of the Consumer Credit Directive lists the information that the credit agreement must specify ‘in a clear and concise manner’, including, in particular, annual percentage rate of charge and the total amount payable by the consumer (point (g)), as well as information on certain rights of consumers.

4. Article 23 of the Consumer Credit Directive obliges Member States to ‘lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to the directive and take all measures necessary to ensure that they are implemented. The penalties provided for shall be effective, proportionate and dissuasive.’

5. France transposed the provisions of the Consumer Credit Directive into French law by amending the provisions of the Code de la consommation (Consumer Code) on the basis of Loi No 2010-737 du 1^er juillet 2010 portant réforme du crédit à la consommation (Law No 2010-737 of 1 July 2010 on the reform of consumer credit). (3)

6. The provisions of the Consumer Code (in the version relevant to the facts of the case) that are relevant to the decision in the preliminary ruling proceedings are, firstly, Article L. 311-9, (4) which provides that, before the conclusion of the credit agreement, the creditor shall assess the consumer’s creditworthiness on the basis of sufficient information, including the information provided by the borrower at the request of the creditor. Secondly, paragraph 2 of Article L. 311-18 (5) makes it possible for the information which must be specified in the contract to be laid down by regulation. Décret No 2011-136 du 1^er février 2011 (Decree No 2011-136 of 1 February 2011) was adopted on the basis of this enabling power, which, in turn, was reproduced in Article R. 311-5 of the Consumer Code. (6) Paragraph I of that provision provides that: ‘The credit agreement provided for in Article L. 311-18 shall be drafted in characters of no less than font size 8. It shall include, in a clear and legible manner’, a number of key details.

7. Article L. 311-48 of the Consumer Code provides for the legal consequences that will be triggered if the creditor fails to comply with its obligations. Pursuant to paragraph 1 of Article L. 311-48, failure to comply with the duty to provide information pursuant to Article L. 311-18 is penalised by forfeiture of the entitlement to interest. Pursuant to paragraph 2 of Article L. 311-48, this penalty is also imposed in the event of failure to comply with the obligation to check creditworthiness pursuant to Article L. 311-9, in which case the court may limit the penalty to part of the entitlement to interest.

8. Disputes arising from the application of the provisions of the Consumer Credit Code are subject to different time bars and limitation periods. Pursuant to Article L. 311-52, actions for payment brought following default in payment are time-barred 2 years after the event giving rise to the dispute. Paragraph 1 of Article L. 110-4 of the Code de commerce (Commercial Code) applies to actions brought by the consumer, pursuant to which obligations arising from transactions between traders or between traders and non-traders are time-barred after a period of 5 years if they are not subject to special shorter limitation periods. In addition, Article 2224 of the Code civil (Civil Code) provides generally that the limitation period for bringing personal actions or actions involving moveable property is 5 years from the date on which the holder of a right became aware, or should have become aware, of the facts entitling him to exercise that right.

9. The Czech Republic transposed the Consumer Credit Directive into Czech law via the Zákon č. 257/2016 Sb., o spotřebitelském úvěru (Law No 257/2016 on credit agreements for consumers, ‘the Law on credit agreements for consumers’) with effect from 1 December 2016.

10. Paragraph 86 of the Law on credit agreements for consumers governs the assessment of consumer creditworthiness as follows:

‘(1) Before the conclusion of a consumer credit agreement or any change of obligation in the agreement that entails a significant increase in the total amount of consumer credit, the supplier shall assess the consumer’s creditworthiness on the basis of essential, reliable, sufficient and proportionate information obtained from the consumer and, where necessary, from a database enabling assessment of the consumer’s creditworthiness or from other sources. The supplier shall provide consumer credit only where the result of a creditworthiness assessment indicates that there are no reasonable doubts about the consumer’s ability to repay the consumer credit. …’.

11. In the event of failure to comply with the obligation to assess creditworthiness, Paragraph 87 of the Law on credit agreements for consumers provides the following:

‘(1) If a creditor provides a consumer with consumer credit in breach of the second sentence of Paragraph 86(1), the agreement shall be null and void. The consumer may raise an objection of nullity within a limitation period of 3 years, running from the date of conclusion of the agreement. The consumer shall be obliged, at a time appropriate to his financial capacity, to return the principal sum of consumer credit paid out.’

12. Paragraph 586 of Zákon č. 89/2012 Sb., občanský zákoník (Law No 89/2012, Civil Code) generally governs ‘relative nullity’ — as provided for by, inter alia, Paragraph 87(1) of the Law on credit agreements for consumers — as follows:

‘(1) Where the nullity of a legal transaction will protect the interest of a certain person, only that person may raise an objection of nullity in relation to that transaction.

(2) If a person entitled to raise an objection of nullity in relation to a legal transaction does not do so, that legal transaction shall be deemed to be valid.’

III. Facts, main proceedings and the request for a preliminary ruling in the Cofidis case

13. On 5 May 2013, Cofidis, the applicant in the main proceedings, concluded a debt consolidation credit agreement with the defendants in the main proceedings, as a consumer, for the amount of EUR 20 600. (7) On 20 December 2017, Cofidis declared the termination of the agreement and, on 29 March 2018, asked the defendants to pay the outstanding instalments.

14. By the action notified on 9 May 2018, Cofidis requests that the defendants be declared jointly and severally liable to pay and that the judgment be declared provisionally enforceable. In the hearing of 21 June 2018, the president of the court addressed, of his own motion, both a possible breach of the obligation to provide an offer of contract containing clear and legible information and a possible breach of the obligation to assess the creditworthiness of the borrowers, as well as the associated penalties (nullity, total or partial forfeiture of entitlement to interest), and invited the parties to adopt a position on those matters. Cofidis contended that the arguments raised by the court of its own motion were time-barred because they had been raised by the court more than 5 years after the conclusion of the agreement.

B. Request for a preliminary ruling and proceedings before the Court of Justice

15. By order of 20 September 2018, received on 1 October 2018, the Tribunal d’instance Épinal (District Court of Épinal, France) therefore referred the following question to the Court for a preliminary ruling:

Does the protection guaranteed to consumers by the Consumer Credit Directive preclude a national provision which, in an action brought by a seller or supplier against a consumer on the basis of a credit agreement which they have concluded, prohibits the national court, on expiry of a limitation period of 5 years from the conclusion of the agreement, from finding and penalising, of its own motion or following an objection raised by the consumer, a failure to comply with the provisions relating to the obligation laid down in Article 8 of the directive to verify the creditworthiness of the consumer, a failure to comply with those of Article 10 et seq. of the directive relating to the information which must be included in a clear and concise manner in credit agreements, and, more generally, a failure to comply with all of the consumer-protection provisions set out in that directive?

16. In the preliminary ruling proceedings before the Court, written observations have been submitted by Cofidis as the applicant in the main proceedings, the Czech Republic, the French Republic and the European Commission. The same parties were also represented at the hearing of 4 September 2019.

IV. Facts, main proceedings and the request for a preliminary ruling in the OPR-Finance case

17. On 21 April 2017, OPR-Finance, the applicant in the main proceedings, granted the defendant in the main proceedings, as the consumer, a revolving credit facility for the amount of 4 900 Czech Koruna (CZK). (8) After the consumer failed to repay due credit instalments, OPR-Finance brought an action before the court on 7 June 2018 seeking the payment of a sum of CZK 7 839 (9) plus statutory interest from 1 October 2017.

18. In the course of the proceedings, OPR-Finance neither claimed nor demonstrated that it had assessed the defendant’s creditworthiness prior to the conclusion of the credit agreement. The defendant, in turn, did not assert that the credit agreement was null and void on the ground that the applicant had failed to assess its creditworthiness.

B. Request for a preliminary ruling and proceedings before the Court of Justice

19. By order of 25 October 2018, received on 5 November 2018, the Okresní soud v Ostravě (District Court of Ostrau, Czech Republic) referred the following questions to the Court for a preliminary ruling under Article 267 TFEU:

1) Do the combined provisions of Article 8 and Article 23 of the Consumer Credit Directive preclude national legislation which specifies that the penalty for failure to fulfil the creditor’s obligation to assess the consumer’s creditworthiness before the conclusion of the credit agreement shall be the nullity of the credit agreement linked with an obligation on the consumer to return the principal sum to the creditor at a time appropriate to the consumer’s financial capacity, where such a penalty (the nullity of the credit agreement) is however applicable only in the event that the consumer invokes it (that is, raises an objection of nullity in relation to the agreement) within a three-year limitation period?

Do the combined provisions of Article 8 and Article 23 of the Consumer Credit Directive require a national court to apply of its own motion the penalty laid down in national legislation for failure of the creditor to fulfil its obligation to assess the consumer’s creditworthiness (that is, even in the event that the consumer does not actively invoke the penalty)?

20. In the preliminary ruling proceedings before the Court, written observations have been submitted by the Czech Republic, the Republic of Portugal and the European Commission. The same parties were also represented at the hearing of 4 September 2019.

V. Admissibility of the request for a preliminary ruling in the Cofidis case

21. The French Government pleads the inadmissibility of the reference in the Cofidis case. It takes the view that the case concerns a hypothetical point of law, since the limitation rules of French law cited are not applicable at all in the main proceedings.

23. It should be noted in this regard that — as stated by the French Government itself — according to established case-law of the Court, requests for a preliminary ruling relating to the interpretation of EU law enjoy a presumption of relevance. (10) It is true that the Court may refuse to give a ruling on a question referred by a national court where it is quite obvious that the interpretation, or the determination of validity, of a rule of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. (11) This cannot be said to be the case here. As stated by the French Government itself, the applicability of the French limitation rule under Article L. 110-4 of the Commercial Code and Article 2224 of the Civil Code is assessed differently by national courts in situations such as those in the main proceedings. Against that background, the national court’s view regarding the applicable provisions of national law must be taken as a basis and, in principle, the question referred for a preliminary ruling enjoys the presumption of relevance.

24. However, in so far as the question referred relates to the situation in which breaches of obligations are penalised on the basis of an objection raised by the consumer, it should be noted that such an objection was not raised in the main proceedings. This aspect of the question is therefore not relevant to the specific dispute and is therefore hypothetical.

25. In addition, I consider that Cofidis is justified in its objection that the reference is inadmissible in so far as it seeks a decision as to whether national courts generally have the power to establish and penalise, of their own motion, infringements of all the consumer protection provisions of the Consumer Credit Directive. It is not clear from the reference precisely which further provisions the national court wishes to apply of its own motion in the main proceedings. The Court therefore does not have before it the factual and legal material necessary to give a useful answer to this aspect of the question referred to it.

26. There is therefore no doubt as to the admissibility of the reference for a preliminary ruling in the Cofidis case in so far as it seeks clarification regarding the power of the national court, irrespective of a national limitation rule precluding it, to examine of its own motion infringements of the creditor’s obligations under Articles 8 and 10(2) of the Consumer Credit Directive and, where appropriate, to impose penalties of its own motion.

27. In the Cofidis case, the French court asks whether it is required to establish and penalise of its own motion an infringement of the provisions of the Consumer Credit Directive — specifically the obligation to assess the creditworthiness of the consumer pursuant to Article 8 and the requirement to include in the agreement the information listed in Article 10 in a clear and concise manner — even though a national limitation rule precludes that.

28. In the OPR-Finance case, the Czech court would essentially like to know, by way of its two questions referred, whether the Consumer Credit Directive requires that failure to assess a consumer’s creditworthiness be penalised of the court’s own motion, even if the national rule on penalties reserves for the consumer the right to assert a breach of duty (second question referred) and also provides for a three-year time bar for that purpose (first question referred).

29. Both cases therefore raise the question of to what extent must the failure of the creditor to comply with its obligations under the Consumer Credit Directive be established and, where appropriate, penalised by a national court of its own motion, irrespective of the national rules on time bars or limitation periods. It therefore appears to be appropriate to handle the two cases together.

30. I will begin by pointing out that national courts must examine these infringements of their own motion, then investigate the effect of the relevant time limits and finally discuss the penalising of infringements.

A. The obligation of national courts to examine of their own motion compliance with the obligations of the creditor under the Consumer Credit Directive (second question referred in the OPR-Finance case)

31. According to established case-law of the Court, ensuring the practical effectiveness of various provisions contained in European Union instruments on consumer protection requires that the national court can or must verify compliance with those provisions of its own motion. (12) Against this background, it must firstly be demonstrated that the reasons for assuming such an obligation of examination (see, in this regard, 1. below) also apply to the obligations under the Consumer Credit Directive that are relevant here (see, in this regard, 2. below).

1. Justification for examination by the courts of their own motion in consumer protection

32. The point of departure here is the case-law on the Unfair Contract Terms Directive, (13) which addresses firstly the power, (14) and then the obligation, (15) of national courts to examine of their own motion whether a term is unfair where they have available to them the legal and factual elements necessary to do so.

33. The Court has also held, in respect of contracts negotiated away from business premises, that a national court may raise, of its own motion, an infringement of the obligation to give notice regarding the right of withdrawal laid down in Article 4 of Directive 85/577/EEC. (16) (17)

34. Furthermore, this doctrine has been incorporated into the law on the sale of consumer goods via the Faber case. In that judgment the Court assumed that national courts have an obligation to examine of their own motion consumer status within the scope of Directive 1999/44/EC. (18) (19)

35. In consumer credit law, the Court has already acknowledged, in the Rampion and Godard case, (20) the power of the national court to verify of its own motion compliance with the protection afforded by Article 11(2) of Directive 87/102/EEC (21) in the context of linked credit agreements. In the Radlinger and Radlingerová case, concerning, inter alia, the obligation to provide information laid down in Article 10(2) of the Consumer Credit Directive, the Court clarified that the national court is required to examine of its own motion compliance with that obligation and, where appropriate, to impose penalties. (22)

36. The obligation imposed on the national court to examine of its own motion the infringement of certain provisions of consumer protection under EU law is referred to in established case-law as a necessary measure for achieving the level of consumer protection sought by the respective directives. (23) This is based on the assumption that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge. (24) Thus, there is a real risk that the consumer, particularly because of a lack of awareness, will not rely on the legal rule that is intended to protect him. (25) The obligation on national courts to examine of their own motion infringements of provisions relating to consumer protection therefore exists in order for the imbalance which exists between the consumer and the seller or supplier to be corrected by the national court by action unconnected with the actual parties to the contract. (26)

37. However, the assumption of such an obligation on the part of the national court requires a thorough analysis of the systematic position and objective of the provision, compliance with which should be examined by the court of its own motion. Contrary to the view taken by the Commission, it is not sufficient to make a sweeping reference to reasons of ‘consistency’ in the area of consumer protection. (27)

38. Accordingly, the Court recently also clarified that not every obligation arising from directives in relation to the legal status of consumers is suitable for examination by a court of its own motion. In the Bankia case, (28) the Court justified not extending the principles regarding the obligation of examination to the area of unfair commercial practices by means of, for instance, a conceptual difference between the Unfair Commercial Practices Directive (29) and the Unfair Contract Terms Directive. The Unfair Contract Terms Directive prohibits the use of unfair terms in consumer contracts and at the same time stipulates the legal consequence of using such terms — namely the loss of their binding nature. On the other hand, although the Unfair Commercial Practices Directive prohibits certain practices, it leaves it to the Member States to establish the necessary means to combat such practices.

39. In the Salvoni case (30) too, the Court similarly refused to transfer the case-law on the obligation of examination of unfair terms to the verification of compliance with the rules on jurisdiction for consumer contracts under the Brussels Ia Regulation, (31) referring to the different subject matter governed by the two instruments.

40. It is therefore necessary to consider whether the obligation — already assumed by the Court of Justice — of the national court to verify of its own motion compliance with the creditor’s obligation to provide information under Article 10(2) of the Consumer Credit Directive equally applies to the requirement of transparency also applicable in the context of Article 10(2) and to the pre-contractual obligation to assess the creditworthiness of the consumer pursuant to Article 8.

2. Requirement for a court to examine of its own motion whether obligations under Articles 8 and 10 of the Consumer Credit Directive have been complied with by the creditor

41. The referring court in the Cofidis case does not doubt that the question of whether the creditor has complied with its obligations under the provisions transposing the Consumer Credit Directive must be examined by the court of its own motion. By its second question, however, the referring court in the OPR-Finance case would like to know, in particular, whether such a requirement exists even where a national rule on penalties leaves it exclusively to the consumer to assert any breaches of obligations on the part of the creditor.

42. The Czech Government is in principle opposed to the assumption that the national court has an obligation to verify of its own motion compliance with the creditor’s obligations in question. (32) Similar to the Court in the Bankia case, (33) its argument is based on a conceptual difference, but in this case between the Consumer Credit Directive and the Unfair Contract Terms Directive: while the lack of binding force of an unfair term was laid down under EU law in Article 6 of the Unfair Contract Terms Directive, Article 23 of the Consumer Credit Directive left it to the Member States themselves to determine the legal consequences of a breach of obligations under the Consumer Credit Directive. This decision-making autonomy enjoyed by the Member States allowed them to opt for supervisory penalties and dispense with penalties under private law, provided that the supervisory penalties were effective, dissuasive and proportionate.

44. It is true that Article 23 of the Consumer Credit Directive leaves it to the Member States to lay down penalties in the event of infringements of the relevant implementing provisions, whereas the Unfair Contract Terms Directive provides that unfair terms are ineffective. In that regard, a parallel can be drawn with the identically worded Article 13 of the Unfair Commercial Practices Directive, which was the subject of the Bankia judgment. Due to this decision-making autonomy, Member States are in fact free to penalise such infringements by means of instruments of private or public law, in particular prudential supervision law, provided that the relevant rule on penalties is effective, dissuasive and proportionate.

45. However, this does not exclude the obligation of courts to examine infringements of the Consumer Credit Directive of their own motion.

46. Firstly, both Czech and French law attach legal consequences to those infringements for the benefit of the consumer concerned, which the court can enforce based on an examination conducted of its own motion.

47. Secondly, the Bankia judgment found, on the basis of the scheme and objectives pursued by the Unfair Commercial Practices Directive relevant in that case, that national courts did not have the power under EU law to examine, of their own motion where appropriate, the existence of prohibited commercial practices when assessing the validity of an enforceable instrument. Pursuant to recital 9 of the Unfair Commercial Practices Directive, that directive is without prejudice to, in particular, individual actions brought by those who have been harmed by an unfair commercial practice and without prejudice to EU and national rules on contract law, including, as is clear from Article 3(2) thereof, the rules on the validity, formation or effect of a contract. (34) Accordingly, solely on the basis of the provisions of that directive, a contractual term cannot be declared invalid even if it was agreed on between the parties to the contract on the basis of an unfair commercial practice. (35) It follows that it is not necessary for national courts, in proceedings relating to the validity of such contracts, to examine of their own motion whether the contracts are based on unfair commercial practices in order to give useful effect to that directive. (36)

48. On the other hand, the Court has already ruled in Radlinger and Radlingerová that compliance with the obligation to provide information under Article 10(2) of the Consumer Credit Directive must be examined by the court of its own motion where necessary. (37) It based this on the consumer’s weak position, as regards both his bargaining power and his level of knowledge, and the risk that he, particularly because of a lack of awareness, will not rely on the legal rule that is intended to protect him. (38)

49. Those considerations apply in equal measure to the creditor’s pre-contractual obligation, under Article 8(1) of the Consumer Credit Directive, to assess the creditworthiness of the consumer, at issue in both cases, and to the requirement of transparency in the context of the obligation to provide information pursuant to Article 10(2) of that directive.

50. Under Article 8(1) of the Consumer Credit Directive, Member States must ensure that, before the conclusion of the credit agreement, the creditor assesses the consumer’s creditworthiness on the basis of sufficient information, where appropriate obtained from the consumer and, where necessary, on the basis of a consultation of the relevant database.

51. This obligation to assess the consumer’s creditworthiness aims to make creditors accountable and to prevent them from granting loans to consumers who are not creditworthy. (39) It seeks to protect consumers against the risks of over-indebtedness and insolvency. It thus contributes to the attainment of the objective of the Consumer Credit Directive, to ensure a high and equivalent level of consumer protection and to facilitate the emergence of a well-functioning internal market in consumer credit. (40)

52. In view of the importance of the obligation to assess creditworthiness and of the imbalance between the creditor and the consumer as referred to in point 36 above, it is necessary for the national court to verify compliance with that obligation of its own motion. In addition, a systematic judicial review of compliance with that obligation contributes to ensuring a level playing field for creditors. On the other hand, it would be virtually impossible for consumers to satisfy themselves that this obligation has been complied with.

53. Compliance with the requirement of transparency under Article 10(2) of the Consumer Credit Directive must also be monitored by courts of their own motion. Pursuant to that provision, the creditor must specify the information listed therein in a clear and concise manner in the credit agreement.

54. In the Radlinger and Radlingerová judgment, (41) the Court emphasised the fundamental importance of the obligation to provide information for the consumer, as it is ‘on the basis of that information that the consumer decides whether he wishes to be bound by the conditions drafted in advance by the seller or supplier’. However, as also stated in recital 31 of the Consumer Credit Directive, such an informed decision requires not only the communication of all the information provided for in Article 10(2). Rather, it is also necessary to comply with the requirement of transparency, which is also contained in the directive, in order to ensure that the consumer can actually be aware of the information in question. In this respect, the requirement of transparency is not confined to formal requirements for the legibility of the information, but also includes substantive requirements for its comprehensibility.

55. A national court is thus, in principle, obliged to examine of its own motion compliance with the obligations of the creditor under national legislation transposing Articles 8 and 10(2) of the Consumer Credit Directive. Accordingly, the combined provisions of Article 8 and Article 23 of the Consumer Credit Directive preclude a national rule on penalties for failure to fulfil the obligation to assess the consumer’s creditworthiness if that rule requires that the consumer actively raises that failure to fulfil the obligation.

B. National time bars and limitation periods (first part of the question in the Cofidis case and first question referred in the OPR-Finance case)

56. In the main proceedings, however, the national courts are prevented from reviewing compliance with Articles 8 and 10(2) of the Consumer Credit Directive and, if necessary, from imposing penalties, since such claims are subject to a three- or five-year time bar or limitation period under the rules governing procedural enforcement. This raises the question of whether such rules are permissible under EU law.

57. The Consumer Credit Directive does not make provision for limitation periods or time bars for claims arising from a credit agreement for consumers. Therefore, these rules are in principle subject to the procedural autonomy of the Member States, which is, however, limited by the principles of equivalence and effectiveness.

58. As both the Czech time bar and the French limitation period apply equally to claims asserted under national and EU law, there are no concerns surrounding the principle of equivalence.

59. However, a more in-depth assessment is needed to determine whether the relevant rules on time bars and limitation periods are compatible with the principle of effectiveness.

61. The requirement of effectiveness prevents the national provisions from making the exercise of rights conferred by EU law practically impossible or excessively difficult. This must be analysed by reference to the role of the provision concerned in the overall system as well as the objective pursued by it. (42)

62. It is true that laying down reasonable time limits for bringing appeals in the form of time bars takes account of the fundamental principle of legal certainty. (43) A national time bar may therefore be compatible with the principle of effectiveness, in particular where it is ensured that the period does not start to run or even expire without the consumer being aware of his rights. (44)

63. However, the conclusion must be different if national time bars or limitation periods lead to an asymmetry of the possibilities for bringing an action, that is to say if a creditor can assert his payment claims for longer than the consumer can assert the invalidity of the contract. Thus, a court must examine the unfairness of a term of its own motion despite the expiry of the time limit, as otherwise the seller or supplier may circumvent the consumer protection intended by the Unfair Contract Terms Directive by simply waiting for the time limit to expire before bringing an action to enforce his unfair terms. (45)

64. In the present cases, the mere fact that the national provisions provide for time bars of 3 years and limitation periods of 5 years does not in itself constitute an infringement of the principle of effectiveness. Three or 5 years may in principle constitute a sufficiently long period of time for consumers to assert claims by filing an action before a national civil court in the event that the contractual relationship is disrupted. However, this cannot be the case if, due to the imbalance described in point 36 above, the consumer does not or cannot assert that the creditor has failed to comply with its obligations, even if merely as a means of defence in an action for payment brought against him.

65. In such a context, account must be taken of the fact that credit agreements for consumers typically give rise to long-term obligations. Periods of limitation and time bars that begin to run when a contract is entered into may have the effect of precluding an examination — either on the application of the consumer or of the court’s own motion — of whether the creditor has complied with its obligations under the provisions transposing the Consumer Credit Directive. This is all the more questionable given that there is generally only cause to carry out this examination in the event of a default and thus possibly only after expiry of the limitation period or time bar (which is relevant to the consumer). There is a risk that the consumer will lose his rights without ever having been aware of them.

66. By contrast, the creditor will generally be able to assert payment claims after such periods have expired, as such claims do not arise until the instalment to be paid by the borrower falls due and the limitation period for them therefore does not begin to run until that point in time. The consumer is therefore at risk of being ordered to pay the contractually agreed sums without it being possible to verify compliance with the creditor’s obligations and, if necessary, to impose penalties. This asymmetry — which is comparable to that in the situation in a previous Cofidis judgment (46) — is capable of impairing the effectiveness of the protection afforded by the Consumer Credit Directive. This risk is demonstrated by the facts of the present Cofidis case: the creditor brought an action against the consumer a few days after the five-year limitation period expired.

67. In the light of such an imbalance, civil penalties limited by time bars or limitation periods would also not be effective, dissuasive and proportionate within the meaning of Article 23 of the Consumer Credit Directive.

68. Finally, legal certainty and, in particular, the risk that consumers could demand the rescission or amendment of contracts over relatively long periods of time do not require limitation periods and time bars that begin to run when a contract is entered into. The reason for this is that the creditor itself has caused this risk by breaching his obligations under EU law. (47)

69. However, the protection of the consumer from time bars and limitation periods comes to an end if the creditor can no longer assert any claims under the credit agreement. There is no apparent reason for continuing to protect the consumer after the contract has been fully performed. If such time periods could then no longer apply, it would instead create an imbalance in favour of the consumer, which could invite abuse.

70. Therefore, as long as the creditor is able to assert claims against the consumer under the credit agreement, national time bars and limitation periods cannot preclude the examination and penalising of the infringement of Articles 8 and 10(2) of the Consumer Credit Directive.

C. Legal consequences of infringements of Articles 8 and 10(2) of the Consumer Credit Directive (second part of the question in the Cofidis case and second question referred in the OPR-Finance case, in so far as it relates to the rule on penalties from the perspective of substantive law).

71. A distinction must be drawn between the question regarding the finding of an infringement and the question regarding the legal consequences of such a finding. (48)

72. One possible consequence of the finding of infringements of Article 10(2) of the Consumer Credit Directive is the right of withdrawal. Pursuant to Article 14(1)(b), the period of withdrawal does not begin to run until the day on which the consumer receives the contractual terms and conditions and information in accordance with Article 10. However, it is not necessary to look into this matter any further in the present proceedings, since the right of withdrawal is not the subject of the references for a preliminary ruling, presumably because no withdrawal was declared in the main proceedings.

73. Apart from that, the law of the Member States determines the legal consequences of breaches of the requirement of transparency when notifying the consumer of the mandatory information regarding the contract, or breaches of the obligation to assess the creditworthiness of the consumer. Pursuant to Article 23 of the Consumer Credit Directive, the Member States themselves lay down the penalties. Pursuant to that provision, but also based on the principle of sincere cooperation, (49) the penalties chosen must be effective, proportionate and dissuasive. Therefore, 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. (50)

1. Assessment of the effective, dissuasive and proportionate nature of the penalty rules at issue

74. The question referred in the Cofidis case primarily seeks to ascertain whether the national limitation rules prevent the national court from examining and, if appropriate, penalising breaches of obligations by the creditor of its own motion. The Court has not been asked whether the national rule on penalties at issue — total or partial forfeiture of entitlement to interest (51) — is, moreover, effective, proportionate and dissuasive. In order to be able to provide a useful answer to the question referred, however, this matter must also be addressed.

75. The rules on penalties at issue in the Cofidis case give the national court a margin of discretion in determining the penalty, since, in cases where creditworthiness has not been assessed, it decides whether the entitlement to interest is totally or partially forfeited. In that regard, it should be emphasised that such discretion must be exercised in compliance with the principle of proportionality, as expressed in Article 23 of the Consumer Credit Directive. Specifically, when choosing the penalty, the national court should ensure that it is proportionate to the gravity of the infringement or infringements and to the personal situation of the defaulting consumer, taking account of all the circumstances of the individual case. The circumstances of the individual case to be taken into account undoubtedly also include the amount of time that has elapsed between the creditor’s infringement of its obligations and the default.

76. The national court must apply the same criteria to the total forfeiture of entitlement to interest in the event of breach of the requirement of transparency, as provided for by French law.

77. Those considerations also apply to the penalty rule under Czech law at issue in the OPR-Finance case. The nullity provided for in Paragraph 87(1) of the Law on credit agreements for consumers in the event of a breach of the obligation to assess creditworthiness can also be applied of the court’s own motion only subject to compliance with the requirements of Article 23 of the Consumer Credit Directive.

78. On account of the credit agreement becoming null and void, the creditor loses its rights to payment of the agreed interest and costs, while the consumer has to repay the amount of credit. In this context, Paragraph 87(1) of the Law on credit agreements for consumers allows the period for repayment to be determined in line with the consumer’s options. (52) The Commission correctly points out that, in the Home Credit Slovakia (53) and LCL Le Crédit Lyonnais (54) cases, the Court has already interpreted Article 23 of the Consumer Credit Directive in relation to national rules on penalties which also entail the loss of the creditor’s entitlement to interest. Reference can therefore be made to the considerations of the Court in those judgments.

79. In so far as the Czech Government argues that compliance with those requirements should be assessed in the light of all the rules on penalties provided for by national law, and thus also in consideration of the administrative penalties provided for by national legislation on the supervision of credit institutions in the event of credit being granted without regard to the obligation to assess the creditworthiness of the consumer, that argument is not convincing.

80. Firstly, it is only necessary to take account of other provisions of national law if there are doubts as to the effectiveness or dissuasive nature of the private-law rule on penalties in question. However, in the light of the above judgments and in view of the fact that the consumer’s repayment obligation may be extended temporally, there are no such doubts in substantive law terms.

81. Secondly, even if it were assumed that further rules on penalties under national law are relevant, the assessment of those rules would ultimately depend on their actual enforcement in practice. This matter remains largely unclarified, despite being raised at the hearing. The Commission claimed, without challenge, that the competent supervisory authority, namely the Czech National Bank, had not notified any decisions regarding the imposition of fines for failure to fulfil the obligation to assess creditworthiness. In my opinion, the Czech Government’s sweeping reference to ongoing checks and an existing evaluation methodology cannot suffice.

82. In any event, it is questionable whether the mere possibility of imposing supervisory penalties in the event that a creditor fails to fulfil its obligations is sufficient to satisfy the requirements of Article 23 of the Consumer Credit Directive. Such sanctions do not offer a sufficiently effective means of enforcing the protection provided for in Article 8 of the Consumer Credit Directive, having regard to the nature of creditworthiness assessment, which also serves to protect the individual. This is because the consumer concerned is not specifically aided by general supervisory measures.

83. Within the framework of national civil proceedings, however, the ‘principle of party disposition’, that is to say that parties exercise sole control over the subject matter of proceedings, is, as a rule, of particular importance. The subject matter of proceedings should not be extended by a court examining of its own motion possible failures by a creditor to fulfil its obligations. In view of the wide range of rules on penalties which the Member States may provide for on account of their freedom of determination, it must also be ensured that the national court does not apply of its own motion a penalty which amounts to a counterclaim. This would, for example, be the case if the court were to award damages to the consumer without such a form of order having been sought.

84. On the other hand, it seems to me possible for penalties to be imposed by a court of its own motion in the interest of the injured party if this merely averts a form of order sought by the applicant. Such an approach does not give rise to any objections in terms of the doctrine on the subject matter of a dispute.

85. However, the guarantees provided by the principle of audi alteram partem and, in particular, the right to be heard must also be observed in this context. (55) They are part of the rights of defence guaranteed by Article 47 of the Charter of Fundamental Rights. The national court must therefore hear the parties before it decides a dispute on a ground that it has identified of its own motion.

86. In addition, any intention to the contrary on the part of the consumer must be taken into account. (56) Accordingly — and this also applies in the OPR-Finance case with regard to the ‘relative nullity’ of the credit agreement — the consumer is free to object to a declaration of nullity if he wishes to adhere to the agreement.

87. I therefore propose that the Court give the following answer to the question referred in the Cofidis case (C‑616/18):

The protection guaranteed to consumers by Directive 2008/48/EC on credit agreements for consumers precludes a national provision which, in an action brought by a seller or supplier against a consumer on the basis of a credit agreement which they have concluded, prohibits the national court, on expiry of a limitation period of 5 years from the conclusion of the agreement, from finding, of its own motion, a failure to comply with the provisions relating to the obligation laid down in Article 8 of the directive to verify the creditworthiness of the consumer or a failure to comply with those of Article 10(2) of the directive relating to the information which must be included in a clear and concise manner in credit agreements, and to establish the consequences that arise from a failure to comply with those obligations under national law. When penalising such a failure, the national court must assess, taking account of all the circumstances of the individual case, whether the respective penalties are effective, dissuasive and proportionate.

88. Moreover, I propose that the Court give the following answers to the questions referred in the OPR-Finance case (C‑679/18):

1. Article 8 of Directive 2008/48/EC on credit agreements for consumers precludes a national provision which, in proceedings brought by a creditor against a consumer on the basis of a contract concluded between them, prohibits the national court from verifying, of its own motion, whether the creditor has complied with its obligation to assess the creditworthiness of the consumer if the consumer has not invoked this within a three-year limitation period or if that limitation period has expired.

2. Where the national court has of its own motion found that Article 8 of Directive 2008/48 has been infringed, it must, subject to any intention to the contrary on the part of the consumer, establish all the consequences arising from that finding under national law without awaiting a form of order to that effect from the consumer and, if applicable, irrespective of the expiry of a limitation period, provided that the penalties imposed by that law are effective, dissuasive and proportionate.

2 Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ 2008 L 133, p. 66) — ‘the Consumer Credit Directive’.

7 According to the referring court, a fixed borrowing rate of 10.86% (annual percentage rate of charge of 11.42%) was agreed. The credit was repayable in 84 monthly instalments of EUR 351.23.

9 According to the referring court, that claim consists of the total amount of credit (CZK 4 900), the costs of providing the loan (CZK 980), interest (CZK 3 696) and a contractual penalty (CZK 363), less the amount of repayments already made (CZK 2 100).

10 See, inter alia, judgments of 7 February 2018, American Express (C‑304/16, EU:C:2018:66, paragraph 32); of 29 May 2018, Liga van Moskeeën en Islamitische Organisaties Provincie Antwerpen VZW and Others (C‑426/16, EU:C:2018:335, paragraph 31); and of 25 July 2018, Confédération paysanne and Others (C‑528/16, EU:C:2018:583, paragraph 73).

11 Judgment of 28 March 2019, Verlezza and Others (C‑487/17 to C‑489/17, EU:C:2019:270, paragraph 29 and the case-law cited therein).

12 See, for instance, judgments of 27 June 2000, Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 26); of 4 June 2009, Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 32); of 4 June 2015, Faber (C‑497/13, EU:C:2015:357, paragraph 42); and of 13 September 2018, Profi Credit Polska (C‑176/17, EU:C:2018:711, paragraph 42).

13 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).

14 See also judgment of 27 June 2000 Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 28). See also judgment of 21 November 2002, Cofidis (C‑473/00, EU:C:2002:705, paragraph 36).

15 See previously judgment of 26 October 2006, Mostaza Claro (C‑168/05, EU:C:2006:675, paragraph 38). More clearly: judgments of 4 June 2009, Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 32); of 14 June 2012, Banco Español de Crédito (C‑618/10, EU:C:2012:349, paragraph 43); and of 21 February 2013, Banif Plus Bank (C‑472/11, EU:C:2013:88, paragraph 23).

16 Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31).

17 Judgment of 17 December 2009, Martín Martín (C‑227/08, EU:C:2009:792, paragraph 29).

18 Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees (OJ 1999 L 171, p. 12).

20 Judgment of 4 October 2007, Rampion and Godard (C‑429/05, EU:C:2007:575, paragraph 69). See also, in relation to the obligation to provide information laid down in Article 4 of Directive 87/102, Order of 16 November 2010, Pohotovosť (C‑76/10, EU:C:2010:685, paragraph 76).

21 Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit (OJ 1987 L 42, p. 48).

22 Judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraph 74). See also, most recently, order of 28 November 2018, PKO Bank Polski (C‑632/17, EU:C:2018:963, paragraph 51).

23 See, previously, judgment of 21 November 2002, Cofidis (C‑473/00, EU:C:2002:705, paragraph 33). See also judgment of 4 October 2007, Rampion and Godard (C‑429/05, EU:C:2007:575, paragraph 63).

24 Regarding the Consumer Credit Directive, see judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraph 63), with reference to the judgment of 1 October 2015, ERSTE Bank Hungary (C‑32/14, EU:C:2015:637, paragraph 39 and the case-law cited therein) in relation to the Unfair Contract Terms Directive.

25 Judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraph 65). See also, previously, judgments of 27 June 2000, Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346. paragraph 26); of 21 November 2002, Cofidis (C‑473/00, EU:C:2002:705, paragraph 33); and judgment of 4 October 2007, Rampion and Godard (C‑429/05, EU:C:2007:575, paragraph 65).

26 Judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraph 67).

27 See, in this respect, judgments of 16 January 2014, Kainz (C‑45/13, EU:C:2014:7, paragraph 20) and of 2 May 2019, Pillar Securitisation (C‑694/17, EU:C:2019:345, paragraph 35), according to which the need to ensure consistency between different instruments of EU law cannot, in particular, lead to an interpretation that is unconnected to the scheme and objectives pursued by the regulation.

28 Judgment of 19 September 2018, Bankia (C‑109/17, EU:C:2018:735, paragraph 31 et seq.).

29 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (OJ 2005 L 149, p. 22).

30 Judgment of 4 September 2019, Salvoni (C‑347/18, EU:C:2019:661, paragraph 44).

31 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2012 L 351, p. 1).

32 The OPR-Finance case concerns only the creditor’s obligation to check the creditworthiness of the consumer.

34 Judgment of 19 September 2018, Bankia (C‑109/17, EU:C:2018:735, paragraph 32).

35 Judgment of 19 September 2018, Bankia (C‑109/17, EU:C:2018:735, paragraph 43; see also paragraphs 33 and 46).

36 Judgment of 19 September 2018, Bankia (C‑109/17, EU:C:2018:735, paragraphs 34 and 47).

37 Judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraph 66).

38 Judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraphs 64 and 65).

39 Judgments of 18 December 2014, CA Consumer Finance (C‑449/13, EU:C:2014:2464, paragraph 43), and of 6 June 2019, Schyns (C‑58/18, EU:C:2019:467, paragraph 40). See also recital 26 of the Consumer Credit Directive.

40 Judgment of 6 June 2019, Schyns (C‑58/18, EU:C:2019:467, paragraphs 28 and 41). See also recitals 7 and 9 of the Consumer Credit Directive.

41 Judgment of 21 April 2016, Radlinger and Radlingerová (C‑377/14, EU:C:2016:283, paragraph 64). Regarding the pre-contractual obligation to provide information, see also recitals 19 and 24 of the Consumer Credit Directive.

42 Judgments of 6 October 2009, Asturcom Telecomunicaciones (C‑40/08, EU:C:2009:615, paragraph 39), and of 21 November 2002, Cofidis (C‑473/00, EU:C:2002:705, paragraph 37). See also, previously, judgment of 14 December 1995, Peterbroeck (C‑312/93, EU:C:1995:437, paragraph 14).

43 Judgments of 6 October 2009, Asturcom Telecomunicaciones (C‑40/08, EU:C:2009:615, paragraph 41); of 10 July 1997, Palmisani (C‑261/95, EU:C:1997:351, paragraph 28); and of 16 December 1976, Rewe-Zentralfinanz and Rewe-Zentral (33/76, EU:C:1976:188, paragraph 5).

44 Judgment of 6 October 2009, Asturcom Telecomunicaciones (C‑40/08, EU:C:2009:615, paragraphs 45 and 46).

45 Judgment of 21 November 2002, Cofidis (C‑473/00, EU:C:2002:705, paragraph 35).

47 In this respect, see also judgment of 19 December 2013, Endress (C‑209/12, EU:C:2013:864, paragraph 30).

48 See Opinion of Advocate General Trstenjak in the Martín Martín case (C‑227/08, EU:C:2009:295, point 73) in relation to the Unfair Contract Terms Directive.

49 Judgment of 27 March 2014, LCL Le Crédit Lyonnais (C‑565/12, EU:C:2014:190, paragraph 44 and the case-law cited therein).

50 Judgment of 9 November 2016, Home Credit Slovakia (C‑42/15, EU:C:2016:842, paragraph 63 and the case-law cited therein). See also Opinion of Advocate General Van Gerven in the Hansen case (C 326/88, EU:C:1989:609, point 8): ‘“Proportionate and dissuasive” means that the penalties must be sufficiently, though not excessively, strict, regard being had to the objectives pursued’.

52 In the oral hearing, the Czech Government made it clear in this respect that the period for repayment is not prescribed by law, meaning that the court can ensure an appropriate balance between all interests in each individual case.

53 Judgment of 9 November 2016, Home Credit Slovakia (C‑42/15, EU:C:2016:842).

54 Judgment of 27 March 2014, LCL Le Crédit Lyonnais (C‑565/12, EU:C:2014:190).

55 Judgment of 21 February 2013, Banif Plus Bank (C‑472/11, EU:C:2013:88, paragraph 29 et seq.).

56 Judgments of 21 February 2013, Banif Plus Bank (C‑472/11, EU:C:2013:88, paragraph 35), and of 4 June 2009, Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 33).

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> OPR-Finance (Consumer protection - Credit agreements for consumers - Opinion) [2019] EUECJ C-679/18_O (14 November 2019) URL: http://www.bailii.org/eu/cases/EUECJ/2019/C67918_O.html Cite as: [2019] EUECJ C-679/18_O, EU:C:2019:975, ECLI:EU:C:2019:975

Court of Justice of the European Communities (including Court of First Instance Decisions)