C-264/02

COFINOGA

OPINION OF ADVOCATE GENERAL TIZZANO delivered on 25 September 2003 1

1. By an order of 5 July 2002 the Tribunal the consumer-borrower, despite the fact d'instance (District Court) in Vienne that the two-year period laid down in this (France) (hereinafter 'the Tribunal d'in- regard by the applicable national law has stance') referred to the Court for a pre- expired. liminary ruling four questions on the interpretation of Council Directive 87/102/ EEC of 22 December 1986 for the approxi- mation of the laws, regulations and admin- istrative provisions of the Member States concerning consumer credit (hereinafter 'the Directive' or 'Directive 87/102'). 2 I — Legal framework

Community law

8. The part of Article 1a(1) that is of relevance to the present case provides that: 'The written agreement shall include:

'1. (a) The annual percentage rate of charge, which shall be that equiva- (a) a statement of the annual percentage lent, on an annual basis, to the rate of charge; present value of all commitments (loans, repayments and charges), future or existing, agreed by the creditor and the borrower, shall be calculated in accordance with the mathematical formula set out in Annex II. (b) a statement of the conditions under which the annual percentage rate of charge may be amended. ...'

In cases where it is not possible to state the 9. Also with regard to the definition of the annual percentage rate of charge, the APR and the way in which it is to be

I-2160

COFINOGA

calculated, Article 1a(6) lays down that: Nevertheless, the provisions of Article 6 shall apply to such credits;

OPINION OF MR TIZZANO — CASE C-264/02

2. Furthermore, during the period of the alia, the amount of the credit, the percen- agreement, the consumer shall be informed tage rate of charge and the total of flat-rate of any change in the annual rate of interest sums payable as well as interest (Article L. or in the relevant charges at the time it 311-10). occurs. Such information may be given in a statement of account or in any other manner acceptable to Member States.

15. Under Article L. 311-33, a lender which grants credit without sending the 5 borrower a preliminary offer that meets these conditions forfeits its right to interest. The borrower is therefore required to repay only the principal.

12. Finally, Article 15 provides that the Directive 'shall not preclude Member States from retaining or adopting more stringent provisions to protect consumers consistent with their obligations under the Treaty'. 16. Pursuant to Article L. 311-9, the duration of agreements under which 'credit is granted, whether or not linked to a credit card, which allows the borrower to draw the amount of the loan in instalments, on dates of his choosing,'3 is limited to one year, with the possibility of renewal. In such cases, the preliminary offer to which Article National law L. 311-8 refers is compulsory only for the initial agreement, apart from the require- ment for the lender to notify the conditions for renewal of the agreement three months before it expires. 13. Under French law, consumer credit is governed by Chapter I, Title I, Volume III, of the Code de la consommation (Consumer Code) (hereinafter 'the Code').

21. As it took the view that the resolution of the dispute before it depended on the 19. The agreement, which was concluded interpretation of certain provisions of for one year, was renewed several times. Directive 87/102, the Tribunal d'instance According to the order for reference, the submitted the following questions to the notification by which each year Cofinoga Court for a preliminary ruling: reminded the borrower of the conditions for renewal of the agreement, sent three months in advance in accordance with Article L. 311-9 of the Code (see point 16 above), mentioned only the monthly per- centage rate of charge applicable in the '1. On a proper construction of [Direc- month in which the letter was sent. It did tives 87/102 and 90/88], must a not, however, state the annual percentage national court uphold the interpreta- tion of its law which requires institu- tions which lend consumer credit to inform a borrower-consumer in writ- 4 — Unofficial translation. It should be noted that pursuant to Article 16 (II-1) of Law 2001-1168 of 11 December 2001 ing of the current annual percentage (JORF 288 of 12 December 2001, p. 19703) the second rate of charge before each extension of sentence of Article L. 311-37 was amended as follows with effect for agreements concluded after enactment of that Law a renewable agreement for credit that (see Article 16(II-3): 'Actions for pavment brought before that court as a result of the default of the borrower must be is drawable in instalments and bears raised within two years of the event which gave rise to them and shall otherwise be time-barred' (unofficial translation, interest at a rate that is expressed to be italics added to indicate the insertions). variable?

4. If not, must the national court, on a 23. In its first two questions the referring proper construction of those directives, court is in essence asking whether Directive uphold the interpretation of its law 87/102 requires it to uphold the interpreta- which permits it to set aside a provi- tion of national law according to which, sion of its national law which prohibits before each renewal of an agreement to the consumer or the court of its own provide credit that is drawable in instal- motion from raising a plea of illegality ments and by means of a credit card, is vitiating the formation or extension of repayable in monthly instalments and bears a consumer credit agreement after a a variable interest rate, the lender is time-limit which derogates from the required to inform the borrower in writing general- law, on the grounds that this of the current APR and the conditions would constitute an exceptional under which it may be amended.

I - 2164

COFINOGA

28. In the opinion of both, however, and contrary to the view that the referring court appears to hold, agreements such as that in the present case fall outside the scope of the 26. In support of this interpretation the provision in question. According to Cofi- United Kingdom Government states, in noga and the United Kingdom Govern- particular, that the purpose of the obliga- ment, the field of application of Article 6 is tions to provide information, as laid down explicitly defined in paragraph 1 of that in Article 4 of the Directive, is to enable the article and extends only to 'the granting of consumer to assess the cost of the credit and credit in the form of an advance on a compare it with other credit offers before current account, other than on credit card committing himself to one or other. This accounts'. Hence, since in the present case objective is effectively met by means of the credit granted to the borrower is not an information provided before or at the time advance on a current account and is, moreover, linked to a credit card, it must be deduced that Article 6(2) is not applic- able and that the lender is therefore not 5 — The latter at least for the situation in which renewal cannot obliged to notify the borrower of changes in be regarded, according to the national law applicable, as the conclusion of a new agreement. the annual interest rate occurring during the 6 — Which 'shall at least include the information provided for in period of the agreement or at the time of its the second indent of Article 6(1)' (second subparagraph of Article 4(2)). renewal.

33. In particular, the Belgian Government, developing a line of argument on which the United Kingdom Government had also dwelt but about which it had expressed doubt, maintains essentially that the reply to the first two questions depends on the nature of the legal act for renewal of the 30. Above all, under French law an agree- agreement, determined on the basis of the ment such as the one in question relating to national law applicable to the credit agree- 'a credit ... which allows the borrower to ment. draw the amount of the loan in instalments on dates of his choosing', has a duration limited to one year and is renewable; however, renewal presupposes that the relevant conditions are communicated to the borrower three months in advance (Article L. 311-9 of the Code de la consommation, see point 16 above). 34. If that act is such as merely to maintain the effects of the initial agreement, it appears that there will be no obligation to provide information. If, on the other hand, it gives rise to the conclusion of a new agreement, the information stipulated in Article 4(2) of the Directive will then be required.

31. When the contractual terms and con- ditions lay down that the rate of interest may vary monthly, as in the present case, it is not possible to state three months in advance the APR that will be applicable at the time of renewal, precisely because the 35. In the present case, since from the order monthlyrate that will be applicable at the for reference it seems possible to infer that time of renewal and on which the APR under French law the renewal of an forecast is based is not known when the agreement must be treated in the same notification provided for in Article L. 311-9 way as the conclusion of a new one, the is made because it could legitimately vary conclusions must be drawn that Article 4(2) during the three months after notification. requires the lender to notify the borrower of

37. In the Commission's opinion, the — Article 4 of the Directive express mention in Article 6(1) of credit agreements 'in the form of an advance on a current account, other than on credit card accounts', serves merely to specify that Article 6(1) and (2) also applies to this type of agreement, despite the fact that Article 2 (1)(e) excludes them from the scope of the 40. As we have seen above, the Belgian remaining provisions of the Directive; that Government maintains that if (as in the mention does not, in the Commission's present case) under the applicable national opinion, have the effect of excluding from law the renewal of a credit agreement is to the scope of Article 6 consumer credit be treated as the conclusion of a new agreements to which the Directive applies agreement, Article 4(2)(a) requires the under the general provision of Article 1 (see lender to notify the borrower of the APR point 4 above). again.

38. According to the Commission, more- 41. In my view, however, it is debatable over, the indication of the APR at the time even from a general point of view whether of renewal as well is a necessary require- the scope and preconditions for applying ment for achieving the essential objective of harmonised rules can be determined on the the Directive, that is to say, to enable the basis of the national law applicable from consumer to compare different credit pro- case to case. In particular, I consider that posals in order to benefit from the best such a manner of proceeding risks jeopard- opportunities available in the marketplace. ising attainment of the objectives pursued

44. That, however, would precisely be the consequence of the solution advocated by the Belgian Government. If French law were applicable — assuming that the representa- 47. Posed in these terms, the question in tion of that law contained in the order for my opinion calls for a negative reply, for reference is correct, although this is con- the reasons which I shall now set out. tested by Cofinoga — Article 4(2)(a) would require the APR to be notified upon renewal of the credit agreement, whereas no such obligation would exist if the 7 — Under Italian law, for example, the application of the principles laid down in Articles 1230 and 1231 of the Civil contract were subject to the law of another Code would lead to the conclusion, in such cases, that no new agreement comes into being and that the contractual Member State under which a change in the relationship is not interrupted.

I-2168

COFINOGA

I-2169

OPINION OF MR TIZZANO— CASE C-264/02

sented by the Commission on 11 September communicate the APR even when a credit 2002 (hereinafter 'the proposal for a agreement is renewed. directive'). 9

58. It therefore seems to me that there can be no basis for a wide interpretation of 55. The new provision lays down that the Article 4 that distorts its clear wording so as consumer must be informed 'of any change to read into it an obligation for the lender to the borrowing rate .... This information to communicate the APR and the clause on must include the new annual percentage variations in the rate not only in the rate of charge'. document concluding the agreement at the time of its conclusion but also at the time of renewing the credit if the interest rate and the essential elements of the agreement remain unchanged.

61. I do not find that argument convincing, however. 65. As to the wording, it is easy to note first and foremost that Article 6 opens, in paragraph 1, with an unequivocal state- ment of its material scope. It lays down that 'notwithstanding the exclusion provided for in Article 2(1)(e), where there is an agree- ment between a credit institution or finan- cial institution and a consumer for the granting of credit in the form of an advance 62. First and foremost, I believe that the on a current account, other than on credit French Government itself rightly objected card accounts,' 10 the consumer must be at the hearing that in the present case it is informed 'at the time or before the agree- irrelevant to ask whether notice of a change ment is concluded' of a series of items and in the interest rate should have been given, conditions in the agreement that are speci- as the agreement was not altered but only fied in detail in the remainder of the renewed on unchanged conditions. provision.

63. Apart from that, however, I note, as do Cofinoga and the United Kingdom Govern- 66. The opening words of the second ment, that Article 6 lays down a special rule paragraph of the article are equally un- applicable solely to agreements relating to equivocal: 'furthermore, during the period 'the granting of credit in the form of an of the agreement, the consumer shall be advance on a current account, other than informed of any change in the annual rate on credit card accounts'. Hence it does not of interest or in the relevant charges at the apply to a contract such as that in the time it occurs'. 10 Emphasis added. There present case, which not only does not relate can be no doubt, therefore, that this to the granting of credit 'in the form of an advance on a current account' but does, on the contrary, involve the provision of a credit linked to a credit card. 10 — Emphasis added.

68. It is a known fact that the Directive, which pursuant to Article 1 is applicable to credit agreements, provides for a minimum harmonisation of the consumer protection rules from various aspects, such as adver- tisements of credit offers (Article 3), pre- contractual and contractual information (Article 4), the legal regime relating to the goods for the purchase of which the credit agreement may be intended (Article 7), early repayment of the credit (Article 8), the consequences of assignment of the 70. Not only does that provision define its credit (Article 9), protection in the event own scope ratione materiae in terms of payment by means of bills of exchange expressly limited to a certain type of credit (Article 10), relations between the borrower agreement, as we have seen, but it also lays and the supplier of goods or services down rules which, while being inspired by a purchased by means of the credit (Article common ratio, nevertheless frequently dif- 11) and the regulation of consumer credit fer in their concrete stipulations from those intermediaries (Article 12). contained in the general rules. In particular, the special nature of Article 6 is expressed both in the obligation to provide informa- tion not required by Article 4 12 and in the 1 1— An examination of the other language versions confirms exclusion of other obligations to provide and even reinforces the conclusion that can be drawn from the Italian version: the opening words of the second information laid down in the general paragraph read, in the French version, 'De plus, en cours de contrat, ...', which in English becomes 'Furthermore, rules. 13 during the period of the agreement, ...', in Spanish 'Además, mientras dure el contrato, ...', which corre- sponds in German to 'Ferner (...) während der Laufzeit des Vertrages, ...'. In all of these versions the conjunction used and the reference to the 'contract' or 'agreement' without further specification make it clear that the obligations laid 12 — For the record, this is the information laid down in down in the second paragraph relate precisely to the Article 6(2). continued performance of the contract, the conclusion of 13 — In all cases, the indication of the APR is mandatory under which is governed by the first paragraph. Article 14 but not under Article 6.

74. In short, both the wording of the Directive and the system it establishes lead That directive also does not oblige the me to conclude that Article 6(2) applies national court to uphold the interpretation only to the agreements indicated in Article 6 of its national law which requires lenders of (1), in other words, I repeat once again, to consumer credit to inform such a consumer agreements for the granting of credit 'in the of the clause concerning the variation of form of an advance on a current account, that annual percentage rate of charge before other than on credit card accounts'. each renewal of such an agreement.

I - 2173

OPINION OF MR TIZZANO — CASE C-264/02

The third and fourth questions referred 78. It may be seen, as Cofinoga and the French Government have correctly pointed out, that the third and fourth questions have been posed only in the alternative in case the reply to the first two questions might be in the affirmative.

77. By its third and fourth questions the referring court seeks essentially to ascertain whether the system of protection that Directive 87/102 provides for consumers allows it:

I - 2174

COFINOGA

IV — Conclusion

81. In the light of the considerations set out above, I propose that the Court reply as follows to the questions posed by the Tribunal d'instance de Vienne by order of 5 July 2002:

Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, as subsequently amended, does not require a national court to uphold the interpretation of its national law which requires lenders of consumer credit to inform a consumer-borrower in writing of the current annual percentage rate of charge before each renewal of an agreement for credit that is drawable in instalments and by means of a credit card and which bears interest at a rate that is stipulated to be variable.

That directive also does not oblige the national court to uphold the interpretation of its national law which requires lenders of consumer credit to inform such a consumer of the clause concerning the variation of that annual percentage rate of charge before each renewal of such an agreement.