Abstract
The Court of Justice had to decide on the transparency of information on the right of withdrawal in consumer credit law. Under German law, the creditor could describe the start of the withdrawal period by mere reference to a legal provision which then referred to other legal provisions which the consumer then had to interpret, which the Court of Justice considered to be lacking in transparency. In the background, there was a conflict between the referring court and the German Federal Supreme Court on the legal competence of the average consumer that the Court of Justice decided in favour of the referring court.
Keywords
1. Introduction
The case of Kreissparkasse Saarlouis turns on the transparency requirements of the information on the right of withdrawal under EU consumer credit law. Its relevance for German consumer credit law can only be fully appreciated in the light of German legislative history and case law, which this case note therefore elaborates on first before it analyses the brief and clear-cut decision of the Court of Justice. The case also underlines the Court’s general approach to the expectations that national courts should have in relation to the legal skills of average consumers, and therefore on the transparency of information or contract terms that are expressed in legal terms.
At the national level, the case is a result of disagreement between a lower instance court, the Landgericht (Regional Court, LG) Saarbrücken, and the Bundesgerichtshof (Federal Supreme Court; BGH). It illustrates how lower instance courts can use the preliminary reference procedures to influence the case law of the highest courts, or even legislation. On the other hand, the reaction of the BGH to the judgment, and therefore its relevance for the credit contracts that were concluded in the past, is of interest in this case.
2. German consumer credit law and the case law of the Bundesgerichtshof
German consumer credit law has a long and complex history. Milestones with relevance for the case at hand were the following: A withdrawal right had already been established in consumer credit law with the Verbraucherkreditgesetz (Consumer Credit Act) of 1990, long before Directive 2008/48/EC introduced that right at EU level. In 2002, in the aftermath of the Heininger decision of the Court of Justice, 1 the German legislator not only abolished the time limitation of the withdrawal right in doorstep selling law in cases where the trader did not inform the consumer correctly about that right, but extended this to all withdrawal rights, including in consumer credit law. 2
In order to compensate traders for the increased risk of withdrawal, the legislator created a model withdrawal information form. 3 According to § 14 para. 1 Verordnung über Informations- und Nachweispflichten nach bürgerlichem Recht (Information Duties Regulation, BGB-InfoV), if traders followed that form, they were deemed to have complied with their duty to inform the consumer of his or her right of withdrawal. 4 This later turned out to be an illusion, as courts held the model withdrawal information form invalid. They saw a conflict between the form and the superior provision of § 355 para. 2 Bürgerliches Gesetzbuch (Civil Code; BGB), which required the trader to provide the consumer with information on the withdrawal right that explained the rights of the consumer. 5
When the German legislator implemented the Consumer Credit Directive in 2010, the perpetual withdrawal right was maintained, as the Consumer Credit Directive does not provide for a maximum withdrawal period in cases where the trader had not correctly informed the consumer of his or her withdrawal right; thus, the Heininger logic applies. 6 Moreover, the legislator voluntarily extended many of the rules to mortgage credit contracts, including the perpetual withdrawal right available to the consumer if the trader did not inform him correctly. 7
That perpetual withdrawal right was only abolished with the implementation of the Mortgage Credit Directive, effective from 21 March 2016, though only for mortgage credit, where the right of withdrawal now expires one year and 14 days after the conclusion of the contract. 8 For consumer credit contracts, the perpetual withdrawal right still exists. In other words, consumers can still withdraw from a consumer credit contract, or an old mortgage credit contract (prior to 21 March 2016), if they were not informed correctly about their withdrawal rights. 9
As an exception to that, with an amendment that came into effect on 30 June 2010, the legislator changed the legal status of the model information form by introducing a provision into primary legislation, according to which use of the model form unrebuttably constituted correct information. 10 This prevented invalidity due to a conflict with superior legislation, as the information obligation and the unrebuttable presumption of conformity were at the same level. The new presumption of conformity gained enormous importance because it turned out that the new model information form was again incorrect. 11 Thus, creditors who had used the model information form were safe, due to the unrebuttable presumption of conformity; whereas creditors that deviated from that form and informed consumers incorrectly about their withdrawal rights (even by making the same mistakes as the legislator) faced the perpetual withdrawal right. 12
Why is this of such practical importance? For two reasons: First, the financial crisis brought down interest rates dramatically. Thus, consumers have a strong interest in replacing their old high-interest credit contracts with new low-interest ones. Second, there is no easy way out of old mortgage contracts. Where other Member States, for example Belgium, allow for the cheap early repayment of credit, 13 in German mortgage credit law, this comes at a high if not excessive price. Creditors can claim compensation for their loss, and they charge enormous sums for early repayment, and this has not changed with the implementation of the Mortgage Credit Directive 2014/17/EU. 14 Thus the withdrawal of the contract is a welcome chance to get rid of the old contract without having to pay compensation for early repayment, and to enter into a new contract at a cheaper interest rate; the notion of Widerrufsjoker (withdrawal joker card) was born.
In consumer credit law, the situation is different, as Article 16 of the Consumer Credit Directive had capped compensation for early repayment, Here, however, the Volkswagen diesel scandal created a new scenario. Consumers faced difficulties in returning their diesel car under sales law, for several reasons. By contrast, where the purchase of the car was financed by credit, withdrawal from the credit contract automatically leads to the dissolution of the linked sales contract, according to an autonomous rule of German law. 15 Thus, consumers can return their cars and claim reimbursement of the purchase price.
This is the background of massive litigation relating to the incorrectness of information on the right of withdrawal under consumer credit law; which brings us to the case law, in particular, of the German Bundesgerichtshof. Initially, the BGH acted in a very consumer-friendly manner. On the one hand, the court was very strict concerning the correctness of the information on the withdrawal right, for example relating to the start of the withdrawal period. Frequently used expressions such as “the withdrawal period begins at the earliest with the receipt of this information” 16 or “the withdrawal period begins one day after receipt of this information” 17 were held to be unclear and therefore insufficient. 18 On the other hand, full compliance with the model information form that the legislator had made a “safe harbour” was assessed meticulously. Where the withdrawal information form of a bank deviated from the wording of the model withdrawal information form, the BGH denied that bank the protection of the unrebuttable presumption. 19
According to estimates, in about two thirds of cases, banks had made (sometimes ever so small) mistakes, which would allow consumers to withdraw from the credit contract. This incentivized law firms to advertise the Widerrufsjoker aggressively, making it big business for law firms and a big problem for the banks.
This development triggered several reactions. The legislator decided to make an end of the Widerrufsjoker by introducing a cap on the withdrawal period for mortgage credit contracts that were concluded before 10 June 2010, provided that the consumer was informed of his withdrawal right at all, although incorrectly. In these cases, the withdrawal right expired on 21 June 2016. 20 Banks routinely claimed abuse of the withdrawal right, and courts often followed that argument, in particular when many years had passed since the conclusion of the contract or when the credit had already been fully paid back. 21 Still, consumers, or rather their lawyers, came up with ever more potential mistakes that could trigger the Widerrufsjoker.
It seems, however, that the Bundesgerichtshof has become unwilling to follow their arguments, and more recently, the court rejected most of the new arguments, often claiming that the reasonably circumspect and observant average consumer could not misunderstand the concrete piece of information in the bank’s information form. 22 Lower instance courts do not always agree with the views of the BGH, and we now see requests for preliminary ruling coming from lower instance courts, in particular relating to information forms that the BGH has already held to be correct, with which the referring courts disagree. 23 The case of Kreissparkasse Saarlouis is one such case, to which we will turn now.
3. The case of Kreissparkasse Saarlouis
A. Facts and procedure
The case of Kreissparkasse Saarlouis is only indirectly influenced by the Consumer Credit Directive, as the credit in question was a mortgage credit, which did not come into the scope of application of the Consumer Credit Directive. 24 In 2012, the consumer JC had concluded a mortgage credit contract with Kreissparkasse Saarlouis, from which he withdrew in 2016, arguing that the withdrawal period had not expired because he had not been informed correctly about his right of withdrawal. The crucial sentence in the bank’s withdrawal information form was the following: “The period begins after conclusion of the agreement, but not before the borrower has received all mandatory information referred to in § 492 para. 2 BGB (for example, information concerning the type of loan, information relating to the net loan amount, information concerning the contractual term).”
This term features in many withdrawal information documents, and indeed in the model withdrawal information form that the legislator provided. In previous cases, the BGH had considered this term as clear and concise in the terms of Article 10(2) of Directive 2008/48/EC and the implementing legislation, § 492 para. 2 BGB and Article 247 § 6 EGBGB. 25 In contrast, the Landgericht (LG) Saarbrücken had doubts and referred the case to the Court of Justice. In its request for a preliminary ruling, the LG Saarbrücken illustrated that under the contractual information in question the consumer would not only have to find § 492 para. 2 BGB but then follow its reference to Article 247 § 6 EGBGB, which he then would have to interpret in order to find out which rules govern the contract.
Due to its potentially enormous economic relevance, the case attracted great attention, and the LG Saarbrücken was heavily criticized in academic writing 26 and its arguments rejected by the BGH as well as by several higher regional courts before the Court of Justice gave judgment. 27 In contrast, the Court of Justice fully confirmed the views of the referring court and found its solution so clear-cut that no opinion of the Advocate General was necessary.
B. The judgment
First, the Court rightly considered the reference admissible. Although mortgage credit is not covered by the Consumer Credit Directive, that Directive and its interpretation by the Court of Justice can still be relevant for mortgage credit cases, as the German legislator has extended the implementation of Article 10 to mortgage credit law. 28 The LG Saarbrücken therefore intended to interpret mortgage credit law in line with the decision of the Court of Justice, which is why that decision was relevant. The fact that the referring court may be overruled by the appeal court, the OLG Saarbrücken, or the BGH in the final instance, 29 does not matter, as for the preliminary reference it only matters whether the decision of the Court of Justice is relevant for the referring court itself.
Secondly, the Court of Justice unsurprisingly confirmed that clear and concise information on “the period during which (the withdrawal) right may be exercised and other conditions governing the exercise thereof” in the terms of Article 10(2)(p) included information on how to calculate the period of withdrawal. 30 Thus, the trader must inform the consumer about the two essential elements of the calculation of that period: its start and its duration.
Thirdly, and most importantly, the Court left no doubt that the way in which JC was informed on the start of the period was by no means “clear and concise”: Where an agreement concluded by a consumer refers to certain provisions of national law as regards information which must be provided pursuant to Article 10 of Directive 2008/48, the consumer is not in a position, on the basis of the agreement, to determine the scope of his or her contractual obligations, check whether all the required information, in accordance with that provision, is included in the contract that he or she has concluded, or a fortiori verify whether the period of withdrawal open to him or her has begun.
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4. The consequences
A. The immediate consequences of the judgment for the Widerrufsjoker
German consumer advocates celebrate a new Widerrufsjoker, and law firms have immediately after the judgment of the Court started to offer their services to consumers who want to get rid of their mortgage credit contract or their diesel car. The situation, however, is more complicated. Indeed, one must distinguish different situations.
First, consider the cases in which the creditor has used the model withdrawal information form without deviation. Here, as mentioned above, German law determines that the contractual information is unrebuttably presumed to be correct (although this has proven to be a fiction). Knowing about the request for preliminary reference by the LG Saarbrücken, courts including the BGH had already stated that they felt bound by that legislative decision, and that they therefore could not, and did not have to under EU law, interpret the law contra legem, despite the decision of the Court of Justice. 32 In this context, it should be noted that the individual senates of the BGH seem to take different approaches. While the 8th senate, dealing among others with sales law, went quite far in reinterpreting the national law, 33 the 11th senate, dealing with credit law, is more restrictive, as it demonstrated only recently in the case of Romano, where it rejected the contra legem interpretation of German law. 34
And indeed, only five days after the judgment in Kreissparkasse Saarlouis, on 31 March 2020, the BGH confirmed its view and refused to implement that judgment, arguing that the clear wording of German law prevented its reinterpretation in the light of Kreissparkasse Saarlouis. 35 Critiques rightly point out that this could be seen as another breach of EU law. In fact, the BGH did not need to interpret Article 247 § 6 EGBGB contra legem to comply with Kreissparkasse Saarlouis. Remember that the unrebuttable presumption only applies if the bank uses the model withdrawal information form without deviation. In the case that the BGH decided, there was a slight deviation from the model withdrawal information form, which the BGH, however, held to be irrelevant. In contrast, the BGH could, and should, have regarded the deviation as relevant, thereby avoiding the unrebuttable presumption of Article 247 § 6 EGBGB. 36
What remains are cases where the creditor used the reference to § 492 para. 2 BGB but deviated from the model information form (in a relevant manner), so that the creditor does not benefit from the fiction of legality. Here, we must distinguish between consumer credit and mortgage credit contracts. As far as consumer credit contracts in the terms of Directive 2008/48/EC are concerned, courts must interpret the law in the light of the judgment in Kreissparkasse Saarlouis. Thus, they have to treat the withdrawal information as insufficient, which means that the withdrawal period has not started to run and therefore has not expired. This is good news for consumers who purchased a diesel car on linked credit.
As far as mortgage credit contracts like the one that gave rise to the case of Kreissparkasse Saarlouis are concerned, which are outside the scope of application of the Consumer Credit Directive, the courts have a choice: If they want to keep up with the parallel interpretation of consumer credit law and mortgage credit law that was intended by the German legislator between 2010 and 2016, they have to come to the same result as under consumer credit law. This was the approach taken in the aftermath of the case of Heininger, 37 and it would provide consumers with a new Widerrufsjoker. They could, however, also opt to interpret the same provisions – § 492 para. 2 BGB and Article 247 § 6 EGBGB – differently, depending on whether the contract is a consumer credit contract or a mortgage credit contract. The BGH has taken this approach of a “split interpretation” in the aftermath of the sales law case of Weber and Putz 38 and rejected the application of the (consumer-friendly) judgment of the Court to business-to-business contracts. 39 In another decision of 31 March 2020, the BGH opted for split interpretation, arguing that under German standards, the reference to legal provisions was “clear and concise”. 40
B. The general approach to the consumer’s legal knowledge
For the European level, however, the Court of Justice once more highlighted its line of argument, first developed in unfair contract terms law, with cases like Océano Grupo and Cofidis, and extended to other areas of consumer law. 41 The average consumer may be reasonably circumspect and observant but he or she surely does not know the law, and cannot be expected to do legal research. It is precisely for this reason that the trader has to inform the consumer about the relevant rules – on this occasion concerning the right of withdrawal. 42 With its judgment in Kreissparkasse Saarlouis, the Court of Justice sent a strong message that is not limited to consumer credit law but should certainly also be applied, for example, in unfair contract terms law.
Interestingly, at least in the 20th century, German case law was fully in line with that general approach of the Court of Justice. The BGH considered the consumer ignorant of the law. 43 In a decision of 1995, the OLG Schleswig had stated, in relation to a standard term, according to which “§ 568 BGB was excluded”: “Only a lawyer can appreciate the relevance of a term that names legal provisions without mentioning their content.” Thus, the court held the term to be intransparent. 44
More recently, however, the courts changed their mind, probably with the availability of legislation online, and in 2006, the OLG Rostock held the same term relating to the exclusion of § 568 BGB to be transparent, arguing that even a lay person could be expected to take a look at the Civil Code. 45 The BGH took a similar approach in a decision of 2014, relating to a provision of investor protection law, although the standard term in question indeed explained the meaning of the term. With their above-mentioned decisions concerning the reference to § 492 para. 2 BGB, however, the BGH clearly asked too much of the consumer.
Given the renewed reminder of the Court of Justice, one might hope that German courts generally reduce their expectations regarding the legal competence of consumers and return to their traditional approach. The consumer must not be compelled to study law to be able to understand his or her rights.
