Provisional text
OPINION OF ADVOCATE GENERAL
CAMPOS SÁNCHEZ‑BORDONA
delivered on 22 February 2024 (1)
Case C‑76/22
QI
v
Santander Bank Polska S.A.
(Request for a preliminary ruling from the Sąd Rejonowy dla Warszawy‑Woli w Warszawie (District Court for Warszawa‑Wola, Warsaw, Poland))
(Reference for a preliminary ruling – Consumer protection – Directive 2014/17/EU – Credit agreements for consumers relating to residential immovable property – Article 25(1) – Early repayment of credit – Reduction in the total cost of the credit – Concept of ‘total cost of the credit to the consumer’ – Method of calculating the reduction)
1. Article 25(1) of Directive 2014/17/EU (2) lays down the right of a consumer who has entered into a credit agreement in relation to residential immovable property to repay that credit in full or in part before the expiry of the agreement (with a reduction in the interest and the costs for the remaining duration of the contract).
2. The Court of Justice has already given a ruling on the reduction of the total cost of the credit in favour of the consumer, following early repayment in relation to a credit agreement of that kind. (3) It must also do so in the near future in connection with the other part of the equation: the (possible) payment of compensation to the creditor for the costs directly linked to early repayment. (4)
3. The referring court in the present case requests certain clarifications of the right available to consumers. It asks, specifically, what method is to be used to calculate the reduction of costs constituting the total cost of the credit in the event of early repayment.
I. Legal framework. Directive 2014/17
4. Recital 66 reads:
‘A consumer’s ability to repay the credit prior to the expiry of the credit agreement may play an important role in promoting competition in the internal market and the free movement of Union citizens as well as helping to provide the flexibility during the lifetime of the credit agreement needed to promote financial stability in line with the recommendations of the Financial Stability Board. However, substantial differences exist between the national principles and conditions under which consumers have the ability to repay their credit and the conditions under which such early repayment can take place. Whilst recognising the diversity in mortgage funding mechanisms and the range of products available, certain standards with regard to early repayment of credit are essential at Union level in order to ensure that consumers have the possibility to discharge their obligations before the date agreed in the credit agreement and the confidence to compare offers in order to find the best products to meet their needs. Member States should therefore ensure, whether through law or other means such as contractual clauses, that consumers have a right to early repayment. Nevertheless, Member States should be able to define the conditions for the exercise of such a right. These conditions may include time limitations on the exercise of the right, different treatment depending on the type of the borrowing rate or restrictions with regard to the circumstances under which the right may be exercised. Where the early repayment falls within a period for which the borrowing rate is fixed, exercise of the right may be made subject to the existence of a legitimate interest on the part of the consumer specified by the Member State. Such legitimate interest may for example occur in the event of divorce or unemployment. The conditions set by Member States may provide that the creditor is entitled to fair and objectively justified compensation for potential costs directly linked to early repayment of the credit. In the event where Member States provide that the creditor is entitled to compensation such compensation should be a fair and objectively justified compensation for potential costs directly linked to early repayment of the credit in accordance with the national rules on compensation. The compensation should not exceed the financial loss of the creditor.’
5. In accordance with Article 25:
‘1. Member States shall ensure that the consumer has a right to discharge fully or partially his obligations under a credit agreement prior to the expiry of that agreement. In such cases, the consumer shall be entitled to a reduction in the total cost of the credit to the consumer, such reduction consisting of the interest and the costs for the remaining duration of the contract.
2. Member States may provide that the exercise of the right referred to in paragraph 1 is subject to certain conditions. Such conditions may include time limitations on the exercise of the right, a different treatment depending on the type of the borrowing rate or on the moment the consumer exercises the right, or restrictions with regard to the circumstances under which the right may be exercised.
3. Member States may provide that the creditor is entitled to fair and objective compensation, where justified, for possible costs directly linked to the early repayment but shall not impose a sanction on the consumer. In that regard, the compensation shall not exceed the financial loss of the creditor. Subject to those conditions Member States may provide that the compensation may not exceed a certain level or be allowed only for a certain period of time.
4. Where a consumer seeks to discharge his obligations under a credit agreement prior to the expiry of the agreement, the creditor shall provide the consumer without delay after receipt of the request, on paper or on another durable medium, with the information necessary to consider that option. That information shall at least quantify the implications for the consumer of discharging his obligations prior to the expiry of the credit agreement and clearly set out any assumptions used. Any assumptions used shall be reasonable and justifiable.
5. Where the early repayment falls within a period for which the borrowing rate is fixed Member States may provide that the exercise of the right referred to in paragraph 1 is subject to the existence of a legitimate interest on the part of the consumer.’
II. Facts, dispute and questions referred for a preliminary ruling
6. On 15 September 2017, QI, acting as a consumer, concluded a credit agreement for the purchase of a dwelling with the legal predecessor of Santander Bank Polska S.A. (‘Santander Bank’), in the amount of PLN 106 600.
7. The agreement provided for a period for repayment of the credit of 360 months and a ‘commission for granting the credit’ of 2.50% of the amount loaned. (5) The commission was indicated as a component of the total cost of the credit.
8. On 4 April 2019 (that is, 19 months after conclusion of the agreement), QI made full early repayment of the credit.
9. QI argued that Santander Bank should refund part of the commission for granting the credit, corresponding to a period of 341 months. QI estimated that amount as PLN 2 462.78, which she claimed from Santander Bank.
10. On 20 July 2020, Santander Bank rejected QI’s claim. It argued that the commission for granting the credit was a one-off payment and was excluded from the obligation relating to a proportional refund.
11. As a precaution, Santander Bank stated that, if the commission for granting the credit were to be partly refundable, the refund of part of the commission should not be proportionate to the relationship between the periods but proportionate to the remuneration expected by the lender for the consumer’s use of the financing.
12. Against that background, the Sąd Rejonowy dla Warszawy-Woli w Warszawie (District Court for Warszawa-Wola, Warsaw, Poland), which is required to give a decision on the dispute, has referred the following questions to the Court of Justice for a preliminary ruling:
‘(1) Must Article 25(1) of Directive [2014/17] be interpreted in the same way as Article 16(1) of Directive 2008/48/EC, that is to say must that provision be interpreted as meaning that the consumer’s right to reduce the total cost of the mortgage in the case of early repayment thereof includes all the costs imposed on the consumer, including the commission for granting the mortgage?
(2) Must the obligation to reduce the total cost of a mortgage in the case of early repayment thereof, as provided for in Article 25(1) of Directive [2014/17], be interpreted as meaning that the total cost of the mortgage should be reduced in proportion to the relationship of the length of the period between the date of the early repayment of the mortgage and the date originally agreed as the date of repayment of the mortgage to the length of the period originally agreed between the date of the drawdown of the mortgage and the date of the full repayment of the mortgage, or should the reduction of the total cost of the mortgage be proportionate to the loss of the expected benefits to the lender, that is to say to the relationship of the remaining interest to be paid after early repayment of the mortgage (due for the period from the date after actual full repayment to the date of the full repayment originally agreed) to the interest due for the entire duration of the mortgage originally agreed (from the date of the drawdown of the mortgage to the date of the full repayment of the mortgage agreed)?’
III. Procedure before the Court of Justice
13. The request for a preliminary ruling was received at the Registry of the Court of Justice on 5 February 2022.
14. The proceedings before the Court were stayed pending judgment in Case C‑555/21, UniCredit Bank Austria.
15. After judgment was given in that case on 9 February 2023, the Court notified the judgment to the referring court, asking that court whether, in the light of the judgment’s contents, it was maintaining its request for a preliminary ruling.
16. On 22 March 2023, the referring court replied to the Court that it was maintaining its request for a preliminary ruling.
17. Written observations were lodged by QI, Santander Bank, the Czech, Italian, Polish and Portuguese Governments and the European Commission.
18. It was considered unnecessary to hold a hearing.
IV. Analysis
A. Methods for calculating the reduction in the total cost of credit, in a situation where the amount of the commission for granting the credit forms part of the obligation relating to reimbursement
19. As directed by the Court, this Opinion will focus on the second question referred for a preliminary ruling.
20. Logically, the Court should answer that question only if it finds that the commission for granting the credit is a cost covered by the reduction provided for in Article 25(1) of Directive 2014/17, which is the subject of the first question.
21. Therefore, I shall rely on the working hypothesis that the answer to the first question is in the affirmative. If the answer were in the negative, my comments would be superfluous.
22. The referring court asks whether Article 25(1) of Directive 2014/17 must be interpreted as meaning that it lays down a method for calculating the reduction (6) in the total cost of the credit (or a constituent part of that total cost), where a consumer repays his or her debt to the creditor early.
23. In particular, the referring court asks whether two approaches, or methods, for determining the amount by which the commission for granting the credit should be reduced in the event of early repayment are compatible with Directive 2014/17.(7)
24. In accordance with the first approach, the reduction rate is the quotient obtained by dividing:
– the length (in days) of the period between the day following the date of early repayment and the date stipulated in the agreement for full repayment of the credit,
– by the length (in days) of the period between the date of drawdown of the credit and the date originally agreed for full repayment of the credit. (8)
25. In accordance with the second approach, the reduction is proportional to the relationship (quotient) of:
– the interest lost by the creditor (for the period after the early repayment until the date of the full payment originally agreed); and
– the total interest (for the period from the date of the release of the credit up to the date of the agreed full repayment of the credit).(9)
26. QI argues in favour of the first method set out, maintaining that the second method is not practicable. QI states that, in the Polish market, mortgage loans are granted at a variable interest rate. Therefore, it is not possible to calculate with certainty the interest that the lender expected to obtain after the date on which early repayment of the loan occurred. (10)
27. The Commission, which favours the same method, bases its view on the fact that Directive 2014/17 does not contain references to any method in particular. It infers from that silence that, ‘in the mind of the EU legislature, the reduction is intended as the simple consequence of early repayment, and therefore its calculation does not present any difficulties’. (11)
28. The Italian, Polish and Portuguese Governments submit that Directive 2014/17 is not intended to regulate that aspect which, therefore, is entrusted to each Member State. (12) On the basis of that common observation:
– The Polish Government opts for linear proportionality, which, as the method which is ‘most comprehensible and transparent for consumers, simple to apply and predictable’, serves well the objective of offering consumers a high level of protection. (13)
– The Italian Government does not express a view, other than to argue that there is no requirement for a single calculation criterion for all the costs that are subject to reduction under Article 25 of Directive 2014/17; the Italian Government also disputes that that hypothetical single criterion has to be the linear proportionality criterion. (14)
– The Portuguese Government leaves the question open. (15)
29. Santander Bank proposes the use of the second method, because it is proportional to the lender’s loss of profits. (16)
30. For the reasons that I shall explain, my view is that Directive 2014/17 does not opt for either of the two approaches proposed. In fact, it does not govern the methodology for calculating the part of the total cost of credit which has to be reduced (or repaid, as the case may be) for a consumer where that consumer discharges his or her obligations early.
31. To a certain extent, that position is the same as that set out by the referring court when it stated that it was maintaining its request for a preliminary ruling in relation to the second question. In its reply of 22 March 2023, the referring court stated that it was doing so ‘because both options presented in relation to the reduction of costs may be regarded as valid’, although it added that it ‘prefers the option of a proportional reduction’.
B. Interpretation of Directive 2014/17
1. Literal argument
32. There are no instructions in the text of Directive 2014/17 regarding how the reduction in the total cost of the credit that is repaid before the agreed time is to be calculated.
33. Article 25(1) of Directive 2014/17 merely states the subject of the reduction (the total cost of the credit); the items to which the reduction applies (interest and other costs); and the temporal delimitation of those items (remaining duration of the contract).
34. Article 25(4) provides that a consumer who wishes to make early repayment must be provided with ‘the information necessary to consider that option’. It then sets out the minimum content of that information, without reference to any calculation criterion.
35. Article 13 of Directive 2014/17, governing basic general information which creditors must provide in relation to credit agreements, states in paragraph 1(k) that such information is to include ‘a description of the conditions directly relating to early repayment’, without specifying what those conditions are.
36. Nor is any specific calculation method expressed in the European Standardised Information Sheet (ESIS), (17) point 9 of which sets out the right of early repayment and requires, where applicable, a statement of the conditions for the exercise of that right. (18)
2. Drafting history
37. General European consumer credit legislation began with Directive 87/102/EEC, (19) which was followed by Directive 2008/48/EC. (20) However, a common regulatory framework for consumer credit agreements secured by a mortgage or comparable security on residential immovable property was not established until Directive 2014/17.
38. The three directives mentioned lay down a consumer’s right to early repayment of a loan. (21) In that regard, the respective preparatory documents all record that:
– There was disagreement about whether a European instrument should enshrine such a right, in the light of the different approaches in the Member States, on the one hand, and the difficulty balancing all the interests involved, on the other.(22)
– There was no discussion regarding the reduction in the total cost of credit associated with early repayment of that credit. That reduction, which Directive 87/102 stipulated must be ‘equitable’, applies, under the other two directives, to interest and costs; the Court has provided a precise definition in respect of each of these. (23)
39. The proposal to adopt a uniform approach for the calculation of the reduction referred to is apparent only in relation to Directive 87/102, with a view to its possible amendment. (24) Unless I am mistaken, that proposal was not taken up again in the negotiations for Directive 2008/48, or in relation to Directive 2024/17 on credit agreements for consumers relating to residential immovable property. (25)
3. Context
40. A systematic interpretation does not lead to the identification of a specific criterion for calculating the reduction in the total cost of the credit referred to in Article 25(1) of Directive 2014/17 either.
41. I explained elsewhere that Directive 2014/17 does not lay down a full set of rules governing credit agreements for residential immovable property and that, with exceptions, the harmonisation it carries out is minimal. (26)
42. As regards the early repayment of credit, the EU legislature recognises the right of consumers to do this and for it to be accompanied by a reduction in the total cost owed. However, it entrusts Member States with the manner of guaranteeing that right (27) and allows them to place conditions on its exercise, by granting them considerable latitude in that regard. (28)
43. Although the method for calculating the adjustment of the total cost of the credit is not expressly listed among the matters for which each national legislature has responsibility, I believe that it is such a matter:
– first, because those matters are listed by way of example; (29)
– second, because the absence of any mention of that calculation contrasts with the detail with which Directive 2014/17 regulates the method for determining other amounts. (30)
44. A reading of Article 25 of Directive 2014/17, in the light of the directive as a whole, does not suggest a specific method of calculating the reduction at issue here either.
45. I do not believe that it is appropriate to deduce that the ‘yield curve’ approach has been provided for based on the reference, in Article 25(3) of Directive 2014/17, (31) to a creditor’s right to compensation. (32) Article 25(3) allows each national legislature to decide whether or not that right exists.
46. It appears to me that a preference for the other method, in other words, the linear proportionality method, on the grounds that it is (allegedly) simple, (33) or even ‘the simplest’ for consumers, (34) can be ruled out in the light of Article 25(4) of Directive 2014/17.
47. In accordance with that provision, a creditor has a duty to provide information to a consumer who expresses his or her intention to discharge the credit early. It is for the creditor, specifically, to ‘at least quantify the implications for the consumer of discharging his obligations prior to the expiry of the credit agreement and clearly set out any assumptions used.’
48. In imposing that obligation on creditors, the EU legislature is acknowledging the intrinsic difficulty of calculations associated with the early repayment of credit. At the same time, it is ensuring that consumers are not required to carry out those calculations, (35) which, in my view, runs counter to any exclusive preference for a particular calculation criterion solely because it is considered to be simple, or the simplest.
49. Finally, from a broader contextual perspective, it should be recalled that Directive 2008/48 does not opt for a specific calculation method either and nor has the Court, in interpreting that directive, given a ruling in that regard. (36)
4. Purpose
50. Directive 2014/17 harmonises aspects of credit agreements for residential immovable property in order to ‘facilitate the emergence of a smoothly functioning internal market with a high level of consumer protection’ in the area of such agreements. The directive also proposes ‘to ensure that consumers looking for such agreements are able to do so confident in the knowledge that the institutions they interact with act in a professional and responsible manner’. (37)
51. In the same vein, the directive aims to ‘develop a more transparent, efficient and competitive internal market, through consistent, flexible and fair credit agreements relating to immovable property, while promoting sustainable lending and borrowing and financial inclusion, and hence providing a high level of consumer protection’. (38)
52. In that connection, allowing the repayment of credit before the expiry of a credit agreement will promote ‘competition in the internal market and the free movement of Union citizens’ and will provide ‘the flexibility … needed to promote financial stability in line with the recommendations of the Financial Stability Board’. In pursuance of those objectives, consumers are also to be able to find the best products to meet their needs during the lifetime of the agreement. (39)
53. I do not believe that it is possible to deduce, directly or indirectly, a specific method for calculating the reduction in the total cost of the credit from those objectives. That is all the more so when Directive 2014/17 acknowledges that there are substantial differences between Member States as regards ‘the national principles and conditions under which consumers have the ability to repay their credit’, and explicitly states the intention to respect those differences. (40)
54. In particular, I am unable to find sufficient support in the aim of ensuring ‘a high level of consumer protection’ for choosing one method over another. I do not see that it is necessary to infer from that aim a preference on the part of the EU legislature for one criterion for calculation of the reduction (which is, in theory, more comprehensible and easier for a consumer use) out of all the criteria that are permissible.
55. The fact that circumstances relating to that reduction, such as its method of calculation, must not lead, in law or in fact, to the annulment of the right to reimbursement or deter individuals from exercising that right, is a separate matter.(41)
56. Directive 2014/17 recognises the lack of financial education of consumers who enter into a credit agreement for residential immovable property. (42) Based on that premiss, the directive makes the responsibility of the creditor to provide quality information the centre of gravity of consumer protection. (43)
57. In particular, Directive 2014/17 relieves consumers of responsibility for calculations relating to early repayment of the credit and entrusts the protection of consumers in this area to the provisions which lay down the obligation to explain to consumers, transparently, (44) how the reduction in the total cost of the credit will be determined.
58. Directive 2014/17 expressly provides that, where a consumer seeks to exercise his or her right to early repayment of the credit, the creditor is to provide the consumer without delay, on paper or on another durable medium, with the information necessary to consider that option. That information must include, at least, a statement of the financial implications of repayment, explaining clearly the basis for these. (45)
59. In accordance with that obligation, as with any other linked to execution of the agreement, creditors are subject to the rules of conduct laid down by Article 7(1) of Directive 2014/17. (46) Consumers also enjoy protection under other directives. (47)
C. The need to specify the method for calculating the reduction in the credit agreement
60. Directive 2014/17 does not provide that consumers are responsible for calculating the reduction linked to early repayment of the credit. I believe, in any event, that borrowers are entitled to know in advance the method for performing that calculation and, afterwards, to check how the calculation has been carried out.
61. The requirement to provide information laid down by Article 25(4) of Directive 2014/17 does not, by itself, guarantee that right, since it operates only when a consumer requests to make an early repayment of credit. The wording of the ESIS does not contain a description of the calculation criterion which is to be used for the reduction at the relevant time. (48)
62. In relation to areas similar to that in the present case, such as the area governed by Directive 2008/48, the Court:
– Has held that the creditor must send the consumer ‘a copy of the credit agreement and all information concerning the repayment of the credit not featured in the agreement itself, but which is necessary for verifying the calculation of the amount corresponding to the reduction in the total cost of the credit to which the consumer is entitled subsequent to the early repayment of that credit and for allowing him or her to bring a possible action for the recovery of that amount’. (49)
– Has stated, in connection with compensation linked to the early repayment of credit, that the contract ‘must … state the specific method for calculating that compensation in a way which is readily understood by an average consumer, so that he or she can ascertain the amount of compensation payable in the event of early repayment based on the information provided in the credit agreement.’ (50)
63. I believe that that case-law can be applied to the reduction in the total cost of the credit provided for in Article 25(1) of Directive 2014/17. Thus, when the agreement is concluded, the consumer will know with certainty: (i) that he or she is entitled to repay the loan early; and (ii) how the total cost of the credit will be adjusted, that is, the criteria for adjustment of the total cost of the credit if, in the future, the consumer decides to discharge his or her obligations early.
D. Application of those considerations to the case in hand
64. If the Court accepts the approach I propose, it may hold that Directive 2014/17 does not opt for (neither lays down, nor prohibits) one of the criteria which the referring court describes in its second question. Accordingly, the referring court’s decision will have to be based on a different line of reasoning.
65. In its order for reference and its order confirming the request for a preliminary ruling, the national court expresses the view that a reduction should be ‘proportionate to the relationship of the period in which the agreement is not executed (on account of early repayment) to the period originally agreed, during which the contract should have applied’. (51)
66. The Polish Government states that that is the formula used by other courts of that Member State; it further states that national law contains no requirement for calculation of the adjustment of the total cost of the credit. (52)
67. Just because that formula is, of the two referred to, the simplest or even the most readily understood by an average consumer, (53) it does not mean that it is the only formula permitted under Directive 2014/17. I stress that that directive does not impose one approach over another, but nor does it prohibit the application ‘by default’ of the approach which the referring court appears to prefer.
E. Temporal limitation of the effects of the judgment of the Court
68. The Italian Government submits that a decision of the Court to the effect that Article 25 of Directive 2014/17 is to be interpreted as laying down one or more specific criteria for calculation of the amount of the reduction in the total cost of the credit could, in the immediate future, lead to the nullity or ineffectiveness of terms agreed in credit agreements relating to immovable property which provide for different criteria.
69. The Italian Government argues that a declaration to that effect by the Court would lead to a new wave of disputes, both in and out of the courts. For that reason, it asks the Court to limit in time the effects of any judgment in that sense, so that it takes effect ex nunc. (54)
70. If the Court agrees with my suggestion, the Italian Government’s request will be irrelevant. In any event, I do not believe that the temporal limitation which the Italian Government proposes would be appropriate, since, as occurred in Case C‑555/21, UniCredit Bank Austria, (55) it has not been shown that the conditions required by the case-law of the Court in that respect have been satisfied. (56)
V. Conclusion
71. In the light of the foregoing considerations, I propose that the second question referred for a preliminary ruling by the Sąd Rejonowy dla Warszawy-Woli w Warszawie (District Court for Warszawa-Wola, Warsaw, Poland) should be answered as follows:
Article 25(1) of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010
must be interpreted as meaning that where a consumer exercises the right to discharge, in whole or in part, his or her obligations under a credit agreement before the expiry date of that agreement, it does not lay down a specific method for calculating the reduction in the total cost of the credit, as far as the costs for the remaining duration of the contract are concerned.