CJEU strengthens consumer rights: “Revocation joker” for millions of consumer credit agreements
The CJEU found that many consumer loan agreements can still be revoked years later.In its ruling of September 9, 2021, The Court of Justice of the European Union (CJEU) found that many consumer loan agreements can still be revoked years later (with the exception of real estate loan agreements).
The reason for this is that the clauses used by German banks in loan agreements are often faulty. The Luxembourg judges criticized above all the inaccurate information or completely inadequate information in the loan agreements. For example, the reference to the abstract amount of the default interest rate was not sufficient; instead, the banks always had to specify a concrete interest rate at the time the contract was concluded. The mere reference “The annual default interest rate is 5 percentage points above the respective prime rate.” (or similar) is therefore not sufficient.
In addition, the CJEU stated that the calculation method of a compensation due in the event of early repayment (early repayment penalty) must also be indicated in an “easily comprehensible manner” for the average consumer, which was also not the case in the proceedings there. This also constituted a reason for revoking consumer credit agreements. In the various proceedings against the banks of the car manufacturers Volkswagen, Škoda and BMW, the judges from Luxembourg held that the right of revocation could still be exercised years later, as these same banks had only inadequately informed consumers about the legal situation when the loan agreements were concluded (Cases C-33/20, C-155/20 and C-187/20). The incorrect or, in some cases, non-existent information had the consequence that the time limit within which the revocation must be declared in principle never began to run. The consequence is a quasi “perpetual right of withdrawal” in favor of consumers.
In addition, the CJEU has finally clarified the question of whether such a right of withdrawal can be forfeited by the consumer. This is because banks often countered consumers’ claims by saying that it would be disloyal to invoke the right of withdrawal after the contract had often been in force for many years. The claim was therefore forfeited. The CJEU has now clearly rejected this argument. According to the CJEU, a bank that has previously failed to properly inform the consumer is precluded from invoking the defense of forfeiture.
The ruling thus massively strengthens consumer rights overall.
The CJEU’s decision now enables consumers to withdraw from financing and thus potentially gain an immense financial advantage. This is because revocation means that the contracts in question are reversed, so that the down payment and loan installments must be refunded. In return, consumers must return the service received, i.e. the vehicle in the case of vehicle loan agreements.
As a result of the decision, it stands to reason that banks will now have to reckon with a huge wave of revocations. This is likely to affect not only car loan agreements, but rather all forms of consumer credit agreements.
Using the example of a car loan, it immediately becomes clear the enormous opportunity this offers consumers: It is nothing less than the possibility of being able to return their vehicle without loss, irrespective of the diesel scandal, if the purchase was financed via a loan!
With its ruling, the CJEU went against the case law of the Federal Court of Justice (BGH), which in the specific case had rejected the appeals of two car buyers as recently as November 2019 and ruled that consumers cannot revoke their car loans years after the contract was concluded – a deeply consumer-unfriendly ruling that significantly weakened the legal position of consumers. This has now been revised by the CJEU.
TAKE ADVANTAGE OF THE OPPORTUNITY AND HAVE YOUR LOAN AGREEMENT CHECKED FOR REVOCABILITY
Are you considering withdrawing from your loan agreement? Our attorneys Dr. Susanne Schmidt-Morsbach and Dr. Wolfgang Schirp, who specialize in banking law, will be happy to advise you at any time, free of charge and nationwide. We will review your contract free of charge and without obligation. Take your chance!