ECJ considers scope of domestic transposition of maximum harmonisation Directive on consumer credit agreements

On 12 July 2012, the European Court of Justice (ECJ) gave judgment in Case C-602/10 SC Volksbank România SA v Autoritatea Naţională pentru Protecţia Consumatorilor − Comisariatul Județean pentru Protecția Consumatorilor Călărași (CJPC) which relates to the directive on consumer credit agreements - Directive 2008/48/EC (the Directive).    The case provides some useful guidance on the extent to which a maximum harmonisation Directive constrains Member States in transposing that legislation into domestic law, and the freedom of Member States to extend the scope of those provisions to matters expressly excluded from them, or to introduce additional obligations.

The reference related to disputed bank charges imposed by Volksbank Romania SA  under agreements between Volksbank and its customers which granted consumers credit secured by mortgages or by other rights in immovable property.   The agreements in question were entered into before national measures designed to transpose the Directive into domestic law came into force.  

Scope

The ECJ held that the Directive does not prevent Member States from extending the provisions of the Directive to areas not covered by its scope, even where the Directive expressly excludes them from its scope.  Specifically, the Court confirmed that a Member State could maintain or introduce national measures that correspond to the provisions of the Directive (or to certain of them) which applied to credit agreements secured by immovable property which are outside the scope of the Directive.

Obligations

The national measures provided that for the credit granted, the creditor could only levy a charge for the processing of the application, a credit administration charge or current account administration charge, compensation in the event of early repayment, insurance costs, penalties if appropriate, and a single charge for services provided upon request by consumers.  Creditors were required to take steps to bring existing agreements in the process of being performed into line with those national measures within 90 days of the date of their entry into force. 

Volksbank redesignated the description of certain "risk charges" in the agreements as ‘credit administration charges but did not change the amount of the charge previously described as a "risk charge", which was calculated on the basis of the balance of the loan and payable monthly throughout its term.  The consumer protection authority considered that the levying of that charge was contrary to the national measures, and drew up a report in respect of Volksbank, ordering it to pay a fine and ancillary penalties. Volksbank challenged that report before the national court, and claimed that the certain provisions of the national implementing measures were contrary to the Directive whose aim was to provide for full harmonisation in order to ensure the free movement of services provided by credit institutions.

The ECJ confirmed that so far as concerns credit agreements which fall within the Directive’s scope, the Directive provides for a full and imperative harmonisation which, in relation to matters specifically covered by that harmonisation, precludes the Member States from maintaining or introducing national provisions other than those which it contains. 

 Therefore, in the case of such agreements, the Member States were entitled to adopt obligations such as the obligation regarding bank charges only if the Directive did not contain harmonised provisions on that matter.   Although the Directive provides for obligations relating to the information required to be supplied by the creditor as regards, inter alia, bank charges in so far as they form part of the total cost of credit, it does not contain substantive rules relating to the types of charges that the creditor may levy.   The ECJ did not think that such a consumer protection rule, in a field not harmonised by the Directive , affect the balance upon which the Directive is based, in the field harmonised by it, between the objectives of consumer protection and the objective of ensuring the establishment of a well‑functioning internal market in consumer credit

The Court had also been asked to consider whether Member States were precluded from imposing obligations (not provided for by the Directive) in relation to the categories of reference indices to which the variable interest rate in those agreements may refer, but the question was deemed inadmissible and not anwered as it was not apparent from the documents submitted to the Court that the applicable national law included rules (imposing obligations on credit institutions as regards the categories of reference indices to which the variable interest rate in consumer credit agreements may refer) that were additional to those prescribed by the Directive.

Finally, the ECJ held that the Directive did not preclude a measure that, in disputes concerning consumer credit, gave consumers direct recourse to a consumer protection authority which had power to impose penalties on credit institutions for infringement of that national measure, without requiring them first to have recourse to an out-of-court resolution procedure provided for by national legislation in respect of such disputes.  The national legislation was designed to strengthen the effectiveness of the Directive and to transpose the Directive requirement that Member States should ensure adequate and effective out-of-court dispute resolution procedures for the settlement of consumer disputes concerning credit agreements.  However, the Directive does not go so far as to mandate the imposition of an obligation of prior recourse to an out-of-court dispute resolution procedure.