CJEU ruled about paying off consumer loans ahead of schedule
The EU Court of Justice ruled that if one pays back their consumer loan ahead of schedule, the bank must give us all its costs proportionately reduced. According to the ruling, creditors must settle commissions, front-end fees and insurance.
The ruling of the CJEU cleared up doubts presented in the reference for a preliminary ruling of the Lublin-Wschód District Court. The ruling shows national courts how to interpret provisions regarding a creditor’s obligation to reimburse part of the total credit costs if the credit is paid back earlier and how to rule on consumers’ claims.
Anyone with a consumer loan may pay it back earlier. In such a situation, the creditor should reduce all credit costs (i.e. fees, commissions, insurance costs) and reimburse the consumer. The reimbursement should be proportional, i.e. it should cover the period from the date of actual credit repayment to the date of final repayment specified in the credit agreement. It cannot depend on when the creditor actually incurred these costs.
“Experience shows that some financial institutions do not settle accounts with consumers. Interest for the time the credit is no longer used is remitted, but some fees, such as administrative fees, commissions or insurance premiums, are not. This is a violation of the law. I am glad that the Court of Justice of the EU shared our view”, says Marek Niechciał, President of the Office of Competition and Consumer Protection.
“I am calling for creditors to respect the CJEU’s ruling. It provides clear information to financial institutions and banks on how to interpret this provision. It is also a good reason for them to normalize the market situation and conclude settlements with customers. Thus, the UOKiK’s intervention can be avoided, and I would like to remind you that the maximum fine for violating the Consumer Credit Act may amount to up to 10% of an enterprise’s turnover”, says Niechciał.
Case reference number in the CJEU: C-383/18.