Credit companies can be liable even when relationship to supplier is not exclusive, says ECJ

The Consumer Credit Directive appears to suggest that action can only be taken against credit companies when they have an exclusive relationship with the supplier. But the ECJ, the European Union's top court, has said that countries can pass laws giving consumers more rights when it comes to undelivered goods.

The Court was ruling in a case involving a man's purchase of a car. Luigi Scarpelli bought the car from Autobrembate and took out a loan from Finemiro through the car company.

After two years of making payments Scarpelli still did not have his car, so he stopped making payments and demanded the return of the money he had already paid to the credit company. Autobrembate eventually went out of business.

The finance company NEOS Banca, which had taken over the debt from Finemiro, contested the repayment of the money and said that Scarpelli should be making the remainder of the payments.

According to the ECJ ruling, "NEOS Banca relied on Italian and Community provisions … maintaining that, where finance is provided on a non exclusive basis, the consumer's right to pursue remedies against the grantor of finance is precluded, since that option is restricted to cases where finance is provided on an exclusive basis."

The preamble to the Consumer Credit Directive does talk about the protections available to consumers when a finance firm is a goods supplier's exclusive credit provider.

The Italian court asked the ECJ if this meant that the business relationship between credit provider and supplier had to be exclusive before the consumer was protected.

Italian court precedents held that the consumer in this case would be protected and could stop making repayments and claim back those already paid, but the court wanted to make sure that it was not breaking EU law. It asked if an exclusive relationship was really necessary if all a consumer wanted to do was terminate the contract and be repaid money already paid out.

The ECJ said that the consumer could gain the minimal protection afforded by the right to end the contract and be reimbursed even if the credit relationship was not exclusive.

It said that the aim of the Directive was partially consumer protection. "As regards the aims of [the] Directive, it is clear from the recitals in the preamble thereto that it was adopted with the dual aim of ensuring both the creation of a common consumer credit market ... and the protection of consumers who avail themselves of such credit," said the court's ruling.

The ruling acknowledged that credit providers had obligations when the credit relationship was exclusive, but said that this should not prevent countries passing laws giving consumers even greater protection.

"Member States should not be prevented by that directive from retaining or adopting more stringent measures to protect the consumer, and therefore prescribes minimal harmonisation in matters of consumer credit. Member States are therefore free to lay down rules which are more favourable to consumers," it said.

"Making the consumer's pursuit of remedies against the grantor of credit subject to the condition that there be a pre-existing exclusivity clause between the grantor of credit and the supplier would be at variance with the aim of the directive, which is primarily to protect the consumer as the weaker contracting party," said the ruling.

The Court did say, though, that if a consumer wants to take more action than just the cancelling of the contract and retrieval of money paid, the exclusive relationship may have to be in place.

"Such a condition may need to be satisfied in order to assert other rights, not covered by national measures on contractual relations, such as the right to damages for loss caused by a breach of obligations by the supplier of goods or services in question," it said.