CONSUMER CREDIT AGREEMENTS: FAILURE TO COMPLY WITH THE INFORMATION OBLIGATION MAY DEPRIVE THE BANK OF ITS RIGHT TO INTEREST

#144Consumer credit agreements: failure to comply with the information obligation may deprive the bank of its right to interest

In its judgment No. C-472/23 of the Court of Justice of the EU in the Lexitor case of 13 February 2025, the Court ruled that, in the event of a breach of the information obligation which affects the consumer’s ability to assess the extent of his obligation, the bank may be deprived of its right to interest and fees. This may also be the case where the individual gravity of the breach of that obligation and its consequences for the consumer may vary from case to case.

Lexitor is a Polish debt collection company to which a consumer assigned his claims arising from a credit agreement concluded with a bank. That company claims that the bank breached its information obligation towards the consumer when concluding the agreement. It brought proceedings before a Polish court seeking payment by the bank of a sum of money corresponding to the interest and fees paid by the consumer. In support of its claim, Lexitor argued, first, that the annual percentage rate of charge (APR) was overstated; according to that company, one of the contractual terms taken into account in calculating that rate must be declared unfair and therefore not binding on the consumer.

On the other hand, the contract does not clearly state the reasons and methods for increasing the fees associated with its performance. According to Lexitor, those breaches are intended to give rise to the imposition of a penalty provided for by Polish law and, therefore, to the loan being exempt from the interest and fees provided for in the contract. The Polish court, wishing to know whether the bank had infringed the information obligation laid down in EU law and whether the exclusion of its entitlement to interest and fees was compatible with EU law, referred the matter to the Court of Justice.

Firslyt, the Court recalled that a loan agreement must state in a clear and concise manner the APR, which is calculated at the time of its conclusion. However, the calculation of the APR assumes that the contract will remain in force for the agreed period. The fact that a credit agreement indicates an APR which appears to be overstated because certain terms of that agreement are subsequently found to be unfair does not in itself constitute a breach of the obligation to provide information.

Secondly, the agreement must describe in a clear and comprehensible manner the conditions under which the charges relating to its performance may be varied. The fact that, for that purpose, the agreement is based on indicators which are difficult for the consumer to verify may infringe the obligation to provide information. This is the case where the average consumer is unable to verify whether the circumstances justifying that variation have arisen or their impact on those charges and is therefore unable to understand the extent of his obligation. It is for the national court to examine whether that is the case in the dispute before it.

Third, in the event of a breach of the information obligation which affects the consumer’s ability to assess the extent of his obligation, the bank may be deprived of its right to interest and charges. Subject to verification by the national court, the Court considers this penalty to be proportionate, although the seriousness of the breach and the consequences for the consumer may vary from case to case.