The European Court ruled that claims may be null and void if no prior analysis has been carried out

The Court of Justice of the European Union (CJEU) has ruled that customers who have taken consumer credit from a financial institution can request cancellation of the contract, and thus the return of interest paid, if it turns out that it was not the case. A previous study on solvency has been completed. The court also points out that a loan can be considered void even if the consumer has already completed payment. This is a measure that does not worry national financial institutions, which ensure a very strong financial solvency analysis.

“Despite this entire regulatory environment, we can never forget that non-compliance, that is, the result of granting credit to those unable to repay it (without prejudice to the fluctuations in the customer’s life that may arise after contracting) is inevitable.” “Members of the Association of Specialized Credit Institutions (ASFAC) and institutions in general do not intend to do so, because the impacts on their activity (bureaucratic, operational and private funds, affecting their profitability) are enormous,” begins Duarte Gomez Pereira, Secretary General of ASFAC told Jornal Económico.

In this sense, he says: “Even if all these obligations do not exist, ASFAC members strictly follow responsible credit granting procedures by carefully analyzing the financial capacity of their clients, which is why the European Court of Justice has issued this decision now, even though it may be so.” . “This is unfair, because we do not know the reasons behind the original case, and we are not worried, because our partners are equipped with very robust solvency analysis processes.”

The decision of the European Court of Justice, dated January 11 and revealed by El Economista on Wednesday, opens the door for customers to claim interest from the financial institution if they see that their ability to pay has not been assessed. This position was adopted in a case in the Czech Republic, where the customer, although he had already finished repaying the loan in full, entered into a dispute with the financial institution due to the lack of a prior assessment of his ability to repay. The Court's decision is valid for both credits already paid and outstanding, as the ECJ emphasizes that the 2008 Consumer Credit Directive clearly states that a prior solvency study must always be carried out to avoid defaults.

“When a creditor does not fulfill his obligation to evaluate the creditworthiness of a consumer, this creditor shall be punished, in accordance with national legislation, with invalidation of consumer credit and loss of the right to pay the agreed interest, even if this contract has been fully performed by both parties and the consumer has not suffered adverse consequences due to failure to compliance,” the court concluded.

Laws hinder lack of analysis in Portugal

“In fact, the European Court of Justice did not open the door, but rather reinforced a rule that comes from the 2008 Directive on Consumer Credit,” says the Secretary General of ASFAC, stressing that “in both the previous and current Directives, the assessment of solvency” is a legal obligation. On the entities that grant credit, in addition to being a duty of conduct in defense of their clients.”

According to Duarte Gomez Pereira, “In Portugal, and in an exemplary way compared to other countries, solvency analysis is an obligation from an early age, which is reflected in the law and in various regulatory documents, and is subject to continuous and detailed monitoring by the authorities.” , i.e. a consumer credit system that imposes a duty to assess a consumer's creditworthiness, “whereby it is your responsibility to prove that you have conducted a due analysis of the customer's financial capacity.”

On the other hand, the Bank of Portugal issued a recommendation within the scope of new consumer credit contracts that imposed limits on the maximum effort rate. The recommendation stipulates that the effort rate should be less than 50%, and there may be a margin (10% of concluded contracts) for an effort rate between 50% and 60%, and only 5% of the total contracts concluded may have an effort-effort rate above 60%.

The regulator's latest financial stability report indicates that more than 90% of consumer credit contracts are below the 50% effort ratio, 6.6% are between 50 and 60%, and 3.18% are above 60%. On the other hand, the default rate on consumer loans is low and decreasing. It was 2.8% in November 2023, down from 3.5% in 2022 and well below 7.1% in 2019, before the pandemic.