The Court of Justice of the EU has clarified which elements of a credit are eligible for a reduction in the event of early repayment of the property credit by the consumer, in its judgment on Thursday 9 February in a case (C-555/21) between the credit institution UniCreditBank Austria (UCBA) and the Austrian consumer association Verein für Konsumenteninformation (VKI).
VKI brought an action before the Austrian civil courts.
VKI wanted the UCBA to be ordered to stop using a standard contractual clause when concluding contracts for credit secured by mortgages covered by Directive 2014/17, which enshrines the consumer’s right to a reduction in the total cost of the credit corresponding to the interest and charges due for the remaining term of the contract. This standard clause provides that in the event of early repayment of the credit by the consumer, the interest and charges dependent on the duration of the credit are reduced proportionally, but that, on the other hand, the handling charges independent of the duration of the credit are not reimbursed.
VKI considered that such a clause was incompatible with Article 25(1) of the above-mentioned Directive.
The court of first instance dismissed VKI’s appeal.
The Austrian Supreme Court (Oberster Gerichtshof) decided to stay the proceedings and to refer the case to the Court of Justice of the EU (CJEU) for a preliminary ruling.
Section 20(1) of the Austrian Federal Act on Mortgage and Building Loan Agreements and Other Consumer Loans of 26 November 2015 (BGBl. I, 135/2015), in the version valid until 31 December 2020 (BGBl. I, 93/2017), provides that where the borrower exercises their right to repay the amount of credit in full or in part before the due date, “the interest due by the borrower shall be reduced in proportion to the reduction in the amount due and, where appropriate, in proportion to the reduction in the duration of the agreement” and that “the charges dependent on the duration of the credit shall be reduced proportionately”.
By its preliminary question, the Austrian Constitutional Court essentially asked the CJEU whether Article 25(1) of Directive 2014/17/EU should be interpreted as precluding the national provision of Austrian law, Article 20(1) of which provides that the consumer's right to a reduction in the total cost of the credit in the event of early repayment includes only interest and charges dependent on the duration of the credit.
The CJEU ruled that the article of the directive cited did not preclude national legislation providing for a consumer’s right to a reduction in the total cost of credit in the event of early repayment of the credit limited to interest and charges dependent on the duration of the credit.
The borrower is therefore entitled, if they repay a mortgage early, to claim a reduction of the interest as well as of the costs depending on the duration of the loan, but this does not extend to costs independent of the duration of the contract.
Link to the judgment: https://aeur.eu/f/5a7 (Original version in French by Émilie Vanderhulst)