The Austrian Supreme Court referred a question to the European Court of Justice (the “ECJ”) for a preliminary ruling. The question concerned whether Article 25(1) of Directive 2014/17/EU of 4 February 2014 on credit agreements for consumers relating to residential immovable property (the "MCD") "must be interpreted as precluding national legislation which provides that the consumer's right to a reduction in the total cost of the credit in the event of early repayment of that credit includes only interests and costs which are dependent on the duration of the agreement".
Article 25(1) of the MCD provides that in case of early repayment "the consumer shall be entitled to a reduction in the total cost of the credit to the consumer, such reduction consisting of the interest and the costs for the remaining duration of the contract". The corresponding Austrian law on mortgage loans was, until 31 December 2020, worded in way that costs which are not dependent on the duration of the credit were not reduced in case of early repayment.
The ECJ held that Article 25(1) of the MCD does not preclude "national legislation which provides that the consumer's right to a reduction in the total cost of the credit in the event of early repayment of that credit includes only interests and costs which are dependent on the duration of the contract".
In forming its decision, the ECJ considered that "the aim of the right to reduction provided for in Article 25(1) of [the MCD] is not to place the consumer in the situation in which he or she would have been if the credit had originally been granted for a shorter period, were for a smaller sum or, more generally, had been granted under different conditions […] but to adapt that agreement according to the circumstances of the early repayment".
The ECJ held that in "those circumstances, that right [to reduction] cannot cover costs which, irrespective of the duration of the contract, are payable by the consumer to either the creditor or third parties for services previously rendered in their entirety at the time of early repayment".
The ECJ furthermore noted that in order to ensure that a creditor does not abusively present costs that are actually related to the duration of the credit as fixed costs incurred irrespective of the duration of the credit, national courts must satisfy themselves that such costs are indeed not linked to the duration of the credit.
Nicolas Widung
Partner
Clint Wanschoor
Junior Associate
