1. By judgment of 5 July 2002, received at the Court on 18 July 2002, the Tribunal d’instance de Vienne (Vienne District Court) referred to the Court for a preliminary ruling under Article 234 EC four questions on the interpretation of 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 (OJ 1987 L 42, p. 48), as amended by Council Directive 90/88/EEC of 22 February 1990 (OJ 1990 L 61, p. 14) (hereinafter ‘the Directive’).
2. These questions have been raised in proceedings between Cofinoga Mérignac SA (hereinafter ‘Cofinoga’), a company incorporated under French law, and Mr Sachithanathan concerning the payment of sums due under an agreement entered into by the latter with that company. Legal background Community legislation
3. Article 1(2)(c) of the Directive provides that it applies to credit agreements, which are defined as agreements whereby ‘a creditor grants or promises to grant to a consumer a credit in the form of a deferred payment, a loan or other similar financial accommodation’.
4. Article 2(1) of the Directive states that: ‘This Directive shall not apply to: … (e) credit in the form of advances on a current account granted by a credit institution or financial institution other than on credit card accounts. Nevertheless, the provisions of Article 6 shall apply to such credits; … .’
5. Article 3 of the Directive provides that any advertisement in which a person offers credit or offers to arrange a credit agreement, and in which any figures relating to the cost of the credit are indicated, must also include a statement of the annual percentage rate of charge (hereinafter the ‘APR’).
6. Article 4(1) and (2) of the Directive states that: ‘1. Credit agreements shall be made in writing. The consumer shall receive a copy of the written agreement. 2. The written agreement shall include: (a) a statement of the [APR]; (b) a statement of the conditions under which the [APR] may be amended. In cases where it is not possible to state the [APR], the consumer shall be provided with adequate information in the written agreement. This information shall at least include the information provided for in the second indent of Article 6(1).’
7. Article 1a(1)(a) of the Directive provides that the APR is to be calculated in accordance with the mathematical formula set out in an annex. Article 1a(4)(a) states that the APR is to be calculated ‘at the time the credit contract is concluded’.
8. Article 6(1) and (2) of the Directive states that: ‘1. Notwithstanding the exclusion provided for in Article 2(1)(e), where there is an agreement between a credit institution or financial institution and a consumer for the granting of credit in the form of an advance on a current account, other than on credit card accounts, the consumer shall be informed at the time or before the agreement is concluded: - of the credit limit, if any, - of the annual rate of interest and the charges applicable from the time the agreement is concluded and the conditions under which these may be amended, - of the procedure for terminating the agreement. This information shall be confirmed in writing. 2. Furthermore, during the period of the agreement, the consumer shall be informed of any change in the annual rate of interest or in the relevant charges at the time it occurs. … …’ National law
9. The principal provisions relating to consumer credit are to be found in Articles L. 311-1 to L. 311-37 of the Code de la consommation (Consumer Code). The provisions that are relevant to the main proceedings are as follows: Article L. 311-8: ‘Credit transactions … shall be concluded in accordance with the terms set out in a preliminary offer which shall be provided to the borrower in duplicate …’ Article L. 311-9: ‘Where credit is granted, whether or not linked to the use of a credit card, which allows the borrower to draw down the amount of the loan in instalments on dates of his choosing, the preliminary offer is only required for the initial agreement. It shall state that the duration of the agreement is limited to one year, with the possibility of renewal, and that the lender must notify the conditions for renewal of the agreement three months before its expiry. …’ Article L. 311-10: ‘The preliminary offer: … (2) Shall specify the amount of the credit … and, if applicable, the percentage rate of charge and total sums payable in addition to interest. … …’ Article L. 311-37: ‘The Tribunal d’instance shall have jurisdiction to hear disputes arising from the application of this chapter. Actions brought before it must be raised within two years of the event which gave rise to them and shall otherwise be time-barred ...’
10. According to the information provided by the national court, the renewal of a credit agreement is treated in French law not as the extension of the original agreement, but as the entering into of a new agreement. The main proceedings and the questions referred
11. Under an agreement dated 1 July 1993, Cofinoga granted a loan to Mr Sachithanathan in the form of a credit facility for a period of one year, with the possibility of renewal, available for drawdown in instalments and linked to a credit card, repayable in monthly instalments at an APR that was expressed to be variable.
12. As sums owing remained unpaid, Cofinoga brought proceedings against Mr Sachithanathan before the Tribunal d’instance de Vienne on 19 November 2001 for payment of the amounts due, together with interest and penalties. Mr Sachithanathan did not enter an appearance.
13. The Tribunal d’instance de Vienne asked Cofinoga to provide evidence that the agreement had been properly renewed following the expiry of the initial term of one year, as required by Article L. 311-9 of the Consumer Code.
14. Having considered Cofinoga’s observations, the Tribunal d’instance de Vienne decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. On a proper construction of [Council Directives 87/102 and 90/88], must a national court uphold the interpretation of its law which requires institutions which lend consumer credit to inform a borrower-consumer in writing of the current [APR] before each extension of a renewable agreement for credit that is drawable in instalments and bears interest at a rate that is expressed to be variable? 2. On a proper construction of those directives, must the national court uphold the interpretation of its law which requires lending institutions to inform that consumer of the clause concerning the variation of that [APR] before each extension of such an agreement? 3. On a proper construction of those directives, is the national court to uphold the interpretation of its law which permits it to allow, without any time-limit, a plea of illegality vitiating the formation or extension of a consumer credit agreement, such as that arising from a failure to state the [APR], raised by the consumer or by the court of its own motion, in a dispute arising from an action for payment brought by the lending institution? 4. If not, must the national court, on a proper construction of those directives, uphold the interpretation of its law which permits it to set aside a provision of its national law which prohibits the consumer or the court of its own motion from raising a plea of illegality vitiating the formation or extension of a consumer credit agreement after a time-limit which derogates from the general law, on the grounds that this would constitute an exceptional restriction on the right of action of the consumer and undermine the effectiveness of consumer protection?’ The questions referred The first and second questions
15. By these two questions, the national court is essentially asking whether the Directive should be interpreted as meaning that before each renewal, on the existing terms and conditions, of a credit agreement for a specified period entered into in the form of a credit facility that may be drawn down in instalments and is linked to a credit card, that is repayable in monthly instalments and bears an interest rate that is expressed to be variable, the lender is obliged to inform the borrower in writing of the current APR and the conditions under which it may be amended. Observations submitted to the Court
16. Cofinoga and the French Government are of the opinion that the reply to these questions should be in the negative. The United Kingdom Government shares this view, at least where the renewal of the agreement falls to be treated as an extension of the original agreement.
17. In their view, in a case such as that of the disputed agreement, the lender’s obligations to provide information under Article 4 of the Directive do not apply to the renewal of the agreement. They rely in that regard both on the wording of Article 4 of the Directive, which makes it clear that it refers to the time when the agreement is entered into, and on the purpose of that article, which is to enable the consumer to assess the cost of the credit and compare it with other offers before committing himself.
18. Cofinoga and the French and United Kingdom Governments take the view, though for different reasons, that the lender’s obligations to provide information under Article 6 of the Directive are also inapplicable in the circumstances of the main proceedings. According to Cofinoga and the United Kingdom Government, that article does not apply because its scope is restricted to advances on a current account, except for advances linked to credit cards, which is not the case under the disputed agreement. In the opinion of the French Government, Article 6 of the Directive lays down a general rule, applicable to all agreements covered by the Directive, but which is relevant only where the agreement is amended. This does not apply to the renewal of the disputed agreement.
19. For their part, the Belgian Government and the Commission propose that the reply to the first two questions should be in the affirmative.
20. The Belgian Government, amplifying the concerns expressed by the United Kingdom Government, observes that in French law the renewal of a credit agreement is treated as the entering into of a new agreement. It follows, in its view, that the lender must provide the information required by Article 4 of the Directive on each renewal of the agreement.
21. The Commission is of the opinion that Articles 4 and 6 of the Directive lay down two sets of general rules and should for that reason be interpreted cumulatively. Noting that Article 4 provides that the agreement must be made in writing and include a statement of the APR, and that Article 6 provides that the consumer is to be informed, during the period of the agreement, of any change in the annual rate of interest or in the relevant charges at the time when it occurs, the Commission concludes that the consumer should be informed before each extension of the agreement of any change in the rate of interest. Reply by the Court
22. In the light of the observations submitted to the Court, the first issue to be considered is whether Article 4 of the Directive should be interpreted as meaning that, where a credit agreement is renewed on the existing terms and conditions, the lender is required to inform the consumer of the APR.
23. The wording of Article 4 of the Directive does not indicate expressly when the information required under it is to be provided to the consumer. Nevertheless, the broad logic of this provision leaves the matter in no doubt. In providing that the credit agreement must be made in writing and that the written agreement must include a statement of the APR and the conditions under which it may be amended, Article 4(1) and (2) of the Directive clearly refers to the time when the agreement is entered into. This interpretation is supported by Article 1a of the Directive, which lays down rules for calculating the APR, and which states at paragraph (4)(a) that this is to be calculated ‘at the time the credit contract is concluded’.
24. As neither the wording of Article 4 of the Directive nor the broad logic of the scheme established by that provision support an interpretation according to which the consumer must be informed of the APR on the renewal of a credit agreement on the existing terms and conditions, the issue arises whether the ends pursued by the Directive require that the consumer be informed at this time.
25. It should be noted in that regard that it is clear from the recitals in the preamble thereto that the Directive was adopted with the dual aim of ensuring both the creation of a common market in consumer credit (third to fifth recitals) and the protection of consumers who avail themselves of such credit (sixth, seventh and ninth recitals) (Case C-208/98 Berliner Kindl Brauerei [2000] ECR I-1741, paragraph 20).
26. Informing the consumer of the total cost of credit, in the form of an interest rate calculated according to a single mathematical formula, is of critical importance in this regard. First, this information, which, under Article 3 of the Directive, must be stated in any advertising, contributes to the transparency of the market, as it enables the consumer to compare offers of credit. Secondly, it enables the consumer to assess the extent of his liability.
27. In the light of these aims, and as the Advocate General has noted in point 53 of his Opinion, it appears that the information in question will be particularly useful if it is provided to the consumer at the decisive phase which precedes the entering into of the agreement. Thereafter, for example when the agreement is renewed on its existing terms and conditions, this information, which has already been provided, would appear to be of less importance.
28. It follows that, in the absence of express provision to that effect, and in the absence of factors which, on the basis of the broad logic or the aims of the Directive, might lead to the inference that Article 4 of the Directive should be broadly construed, that provision cannot be interpreted as meaning that it requires the lender to inform the consumer of the APR prior to the renewal of a credit agreement on the existing terms and conditions.
29. The fact that, according to the information provided by the national court, the renewal of a credit agreement is treated in French law not as the extension of the original agreement, but as the entering into of a new agreement, does not affect this analysis. As the Advocate General points out in point 43 of his Opinion, the objective of harmonisation underlying the Directive would be frustrated if the interpretation of the rules laid down under it were to depend on the specific provisions of the national law of a particular Member State.
30. In the light of the interpretation to be given to Article 4 of the Directive, it is then appropriate to consider whether Article 6 of the Directive should be interpreted as meaning that, where a credit agreement is renewed on the existing terms and conditions, the lender is required to inform the consumer of the APR.
31. Having regard to the observations submitted to the Court, the scope of that provision must first be determined.
32. Article 6(1) of the Directive states that: ‘notwithstanding the exclusion provided for in Article 2(1)(e), where there is an agreement between a credit institution or financial institution and a consumer for the granting of credit in the form of an advance on a current account, other than on credit card accounts’, the consumer must be informed ‘at the time or before the agreement is concluded’ of those terms and conditions of the agreement specified in the remainder of the provision. Article 6(2) adds that: ‘furthermore, during the period of the agreement, the consumer shall be informed of any change in the annual rate of interest or in the relevant charges at the time it occurs’. It is thus clear from the wording of Article 6 that Article 6(2) refers to the same agreements as those covered by Article 6(1).
33. It is also equally clear from the wording of Articles 2, 4 and 6 of the Directive that the broad logic of the scheme which they establish means that Article 6 lays down a special rule applicable to a type of agreement which is otherwise excluded from the scope of the general rules laid down under the Directive.
34. Article 2(1)(e) of the Directive excludes from its scope credit granted in the form of advances on a current account other than on credit card accounts. For credit granted in the form of advances on a current account, Article 6(2) of the Directive obliges the lender to provide the consumer with information which is not required under Article 4 of the same directive, while Article 6(1) obliges the lender to provide to the consumer the information specified in it, which does not include the APR.
35. Furthermore, the second subparagraph of Article 4(2) of the Directive provides that in cases where it is not possible to state the APR at the time at which the agreement is entered into, the consumer should none the less be provided with ‘adequate information’ in the written agreement, including ‘at least … the information provided for in the second indent of Article 6(1)’. As the Advocate General has noted in point 73 of his Opinion, there would be no need whatever for an express reference of this kind if Article 6 applied in its own right to all agreements subject to the Directive.
36. It follows that Article 6 applies only to those agreements expressly referred to in it, that is to say, credits in the form of an advance on a current account, other than on credit card accounts.
37. It is common ground that the disputed agreement does not fall within that category.
38. That being so, the rules laid down under Article 6 of the Directive cannot be relevant for determining the obligations to provide information imposed on the lender in a case such as that which is the subject of the main proceedings.
39. In the light of the foregoing, the answer to the first and second questions must be that the Directive does not require, before each renewal, on the existing terms and conditions, of a credit agreement for a specified period entered into in the form of a credit facility that may be drawn down in instalments and is linked to a credit card, that is repayable in monthly instalments and bears an interest rate that is expressed to be variable, that the lender inform the borrower in writing of the current APR and of the conditions under which the latter may be amended. The third and fourth questions
40. In light of the answer to the first and second questions, there is no need to reply to the third and fourth questions.