In the field of banking law and consumer protection, an important decision was handed down by the Court of Justice of the European Union (CJEU) on 13 February 2025, in a case known under reference C-472/23, called “Lexitor.” This decision is crucial because it provides welcome clarifications on the information obligations of banks in the area of consumer credit and on the sanctions applicable in the event of breach.
This case originated in Poland, where a debt collection company (having acquired the rights of a consumer) sued a bank, alleging that the bank had not properly informed the consumer when the credit agreement was entered into. The Polish court, faced with this question, asked the CJEU to clarify the situation based on European Directive 2008/48/EC, which governs consumer credit agreements.
The CJEU ruled on three questions: two concerning the scope of the information obligation and a third concerning its sanction.
An Overestimated Annual Percentage Rate (APR): Not Necessarily a Violation in Itself
The APR is a key indicator for consumers, as it is intended to reflect the total cost of a credit. But what happens if this rate turns out to be overestimated?
The CJEU held that the fact that a credit agreement states an APR that is overestimated, simply because certain clauses of that agreement are subsequently found to be unfair (within the meaning of Directive 93/13/EEC on unfair terms) and, consequently, do not bind the consumer, does not, in itself, constitute a violation of the information obligation.
Why? The Court considers that if the consumer was informed of a high APR, they were warned about the potentially significant cost of the credit. The subsequent lowering of the APR is a consequence of the removal of the unfair terms, and not an initial failure to inform about the actual rate. The bank did not seek to conceal a lower cost, but simply calculated the APR by including clauses it believed to be valid at the time. This logic aims to prevent the consumer from “manipulating” the rules of the directive to their advantage in such a situation.
Transparency on Fees and Commissions: A Strict Information Obligation
It is on this point that the CJEU is more demanding of lenders.
The Court stated that the listing, in a credit agreement, of a number of circumstances that justify an increase in fees related to the performance of the agreement, constitutes a violation of the information obligation if a normally informed, reasonably attentive and prudent consumer is unable to verify whether those circumstances have occurred and what their impact on the fees is.
This violation is established as soon as that indication is liable to undermine the consumer’s ability to assess the scope of their commitment. Transparency is therefore paramount: the consumer must be able to clearly understand how fees may change and verify their legitimacy.
More specifically, in this case the agreement mentioned that there might be additional charges in the future, in certain situations. The question put to the CJEU was the following: is it sufficient for the bank to inform you that there may be an increase in charges, without giving the consumer the means to verify precisely when, how, and why those charges would increase, or by exactly what amount?
The Court of Justice answered this question very clearly, concerning Article 10(2)(k) of Directive 2008/48/EC. It emphasized that the information contained in your credit agreement is only useful if it does not contain contradictions liable to mislead you.
Above all, the CJEU insisted on the notion of effective transparency. It is not sufficient to list events that may trigger an increase in charges. If the indicators used to define those increases are difficult for you, the consumer, to verify, then this creates legitimate uncertainties.
In other words, if you, as an “average consumer, normally informed and reasonably attentive and prudent,” are unable to:
- Verify the occurrence of the situations that trigger the increase in charges;
- Or to understand their exact impact on the amount of those charges;
then there is a violation of the bank’s information obligation. The bank must not merely mention the possibility of an increase; it must provide you with the “necessary tools” so that this information is “actionable” and so that you can fully understand and, if needed, verify the legitimacy of those increases throughout the term of your credit. This is a requirement of clarity that enables you to measure the full scope of your financial commitment.
Sanctions for Breaches: A Uniform Approach to Protect the Consumer
Finally, the CJEU clarified the rules concerning the sanctions applicable to banks in the event of a breach of their information obligation.
The Court decided that Directive 2008/48/EC does not preclude national legislation that provides for a uniform sanction in the event of a breach of the information obligation. This uniform sanction may consist of forfeiture of the lender’s right to interest and charges, and this, regardless of the level of individual severity of the breach.
However, this sanction is only justified insofar as the breach is liable to undermine the consumer’s ability to assess the scope of their commitment. This means that even a breach that may seem “minor” in the bank’s view can result in the loss of its right to interest and charges, if it prevented the consumer from fully understanding their commitment. This is a strong measure aimed at encouraging banks to be beyond reproach in their duty to inform.
Summary for the consumer:
This decision strengthens consumer protection in the area of credit.
- The slightest lack of transparency in how charges may increase constitutes a serious fault by the bank if it prevents you from understanding your commitment.
- And if the bank breaches its duty to inform in a manner that compromises your understanding, the sanction may be the loss of all of its interest and charges, regardless of the “apparent” severity of the fault.
This decision underscores the paramount importance of information for the consumer so that they can make an informed decision and measure the full extent of their financial commitment. It represents a significant step forward for greater transparency in the consumer credit sector.
