Brussels, 03/12/2015 (Agence Europe) - When taking a loan in a foreign currency, consumers are unable to benefit from the protection provided to investors. Credit institutions are not required to evaluate the suitability or the appropriateness of the service to be provided as stipulated in the directive on financial instruments markets.
This is the conclusion drawn by the European Court of Justice in a decision made on Thursday 3 December (C-312/14). The Court used this opportunity to examine the practice where consumers attempt to obtain a loan with more favourable interest rates than those offered in their own national currency. They do it, however, with a certain amount of risk due to the possible appreciation of the currency in which they take the loan and the calculation of the monthly repayment dates. In 2014 (C-26/13), the Court established a raft of protective provisions that would apply to this kind of loan, introducing certain obligations on lenders, such as those relating to the need to provide consumer information.
Today, for the first time, the European judges had to examine the question of whether a loan in a foreign currency (for purchasing a car in this case) is covered by the directive on financial instruments market or not (2004/39/EC). If this were the case, the credit institutions would be obliged to evaluate the appropriateness and suitability of the service provided and the non-respect of these provisions, which would lead to the contract for the loan being made null and void.
However, this is not the case, the Court ultimately concluded. It considered that the exchange operations that involve this kind of contract do not seek to provide an investment service because they are purely incidental to making the loan available and to the repayment of the loan. According to the Court, the party taking up the loan in the foreign currency seeks only to secure funds with a view to purchasing goods or a service, and not to manage a foreign exchange risk or to speculate on a currency's exchange rate. A loan contract which involves exchange operations is therefore not a financial instrument in the sense of Directive 2004/39/EC. (Original version in French by Jan Kordys)