Revocations after the ECJ ruling: Many consumers want to cancel loans

Status: 09/22/2021 8:16 am

The European Court of Justice recently ruled that consumer credit is easier to revoke. But if you want to terminate your loan agreement, you should consider a few things.

Maurice F. from Frankfurt bought a car last year. Together with his partner, the 38-year-old bought a car worth 43,000 euros. He financed the purchase through the Audi Bank – with the help of a loan. But that is now too expensive for the Frankfurter with an interest rate of almost two percent. He is also dissatisfied with the car, which is a petrol engine. Instead, he would rather have a more environmentally friendly electric or hybrid car.

“Now I could just sell the car on the used market,” says the man from Frankfurt. “But I would make a big loss”. From an economic point of view, it makes more sense to him to revoke the loan agreement and reverse the transaction. He has high hopes for the latest ruling by the European Court of Justice (ECJ) on consumer credit: “That suits us very well and we are pleased because it is so consumer-friendly.”

Lawyer reports of many inquiries

Just under two weeks ago, the judges ruled that many loan agreements were incomplete and incomprehensible to laypeople. Therefore, they could be revoked. The 38-year-old Maurice F believes that his contract is also vaguely worded: “If I didn’t pay my installments on time, I wouldn’t know what interest on arrears would be due, because there is only one calculation formula.”

The banks would have to specify a specific interest rate, the judges at the ECJ also demanded. Other mandatory information was also often missing; about how the so-called early repayment penalty is calculated, i.e. the fee for the early termination of a loan agreement. Finally, money houses could not just refer to an arbitration board and their website.

In order to reverse the transaction, the car buyer Maurice F. hired the lawyer Andreas Paul. After the verdict, it was very popular: “Every day, up to fifty consumers contact us who want us to check their credit agreements,” says Paul. This also included people whose vehicles were affected by the diesel scandal. The judgment can be applied not only to loans to finance cars, but also to sofas or kitchens. “Only real estate loans are excluded,” said the lawyer.

Even many old contracts are vulnerable

It is crucial that consumers, for example, if they have bought a washing machine in an electronics store or a car from a car dealer, have taken out the loan for financing directly there. Only then can they revoke the loan agreement and reverse the deal. This is even possible with old contracts that you signed more than ten years ago.

With the reversal, borrowers get back all the installments they have paid in so far. To do this, they return the goods financed on credit. Since they used it, it is worth less. How this loss of value is to be calculated and whether consumers have to pay for it at all is, however, controversial and has not been conclusively clarified by the courts. Lawyer Paul is of the opinion that a reversal for consumers is in any case much more lucrative than if they were to resell used goods.

Get out of expensive loans during the crisis?

The lawyer Simon Bender describes the ECJ ruling as a “milestone”. Consumers would now have a much better chance of getting out of disadvantageous loan agreements. “Some have the problem that they earn less because of the Corona crisis and that the installments for their loans are too expensive for them,” says Bender. Others are now financially better off and want to get out of a loan agreement with the help of the ECJ ruling without having to pay early repayment penalties.

“If banks take back the used goods or offer a comparison, a solution can be found quickly,” says Bender. However, the money houses are likely to still argue about what consumers are entitled to repay. It becomes more difficult if the banks refuse to withdraw, says the lawyer: “If the consumer has to go to court, the case can drag on for up to a year.”

Consumers can face high costs

Marcus Köster from the North Rhine-Westphalia consumer center is dampening the euphoria that may arise with some lawyers in view of the ECJ ruling. “This is a gateway for a withdrawal,” admits Köster. “But it still remains to be seen how the Federal Court of Justice will deal with the judgment of the ECJ.” After all, the BGH had ruled several times over the past few years that certain car loans from the banks were not objectionable.

That is why the consumer advocate expects more resistance from banks and savings banks. He sees a certain risk for consumers. “It can quickly result in high legal and court costs,” warns Köster. Consumers should have appropriate reserves or legal expenses insurance for this – but even that does not always cover these costs. The consumer advocate is also skeptical as to whether a revocation is worthwhile in any case. In this respect, he recommends that consumers seek detailed professional advice beforehand.

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