Example 1: Anna S Credit Cards

Example 1: Anna S Credit Cards

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Example 1: Anna’s credit cards

Anna is a resident of Utopia, an EU Member State. In March 2015, Anna lost her job as a sales manager at a car dealer firm. The prospects of getting a new job were not very good, due to the job market and also the circumstances of Anna’s dismissal. Anna lived in a rented flat and had no assets, but she owed approximately 100000 euros in total to different creditors. Her only income for the nearest future would be a small subsistence allowance from the municipality. Anna felt that she needed some comfort after a turbulent period and applied for a credit card in two different finance institutions. Both institutions offered “express credit cards” on the Internet. The only thing Anna had to do, was to submit some information on the relevant webpage. As income per year, she filled in 80000 euros, which had been her income from the car dealer firm. In the column for “existing debt”, she filled in “0”. Both of the finance institutions had routines for checking the applicant’s most recent available tax data (here 2013) and possible registered debt collection involving the applicant. Anna came out with a clean record and was granted a credit card by each of the finance institutions, both of them with a credit limit of 10000 euros. On the application webpage there was a link to a pdf-file with “credit contract terms” and Anna ticked a box confirming that she had read the document (something she had not done). She also accepted the contract by her electronic signature. There had been no personal contactbetween Anna and the finance institutions.

By August 2015, Anna had reached the credit limit for each of the two credit cards. She had spent the money on travels and parties. When both institutions in September 2015 claimed a full repayment of the loans, due to her defaulting payment of instalments, she objected to this and argued that the credit was given in violation of Utopian legislation implementing EU law. The finance institutions did not agree: there was no violation of the rules, and, in any case, possible violations would not have consequences for their claims against Anna.

Utopia has implemented the relevant directives word by word, but there was no specific rule regarding violation of this legislation.

Example 2: Hans buys an apartment

Hans, also a resident of Utopia, was 25 years old in 2013 when he bought a three-room apartment in his home town. At the time, he had just started in his first job after having finished his education as an engineer. In order to buy the apartment, he had to take out a loan of 200000 euros from the local bank. The flat cost 220000 euros. The loan was secured by a security right on the apartment.

In 2015, Hans experienced financial difficulties. His salary was not sufficient to cover the loan instalments in addition to ordinary living costs. Her tried to sell the apartment, but prices were lower now than in 2013, and a sale would leave him with a residual debt of 40000 euros to the bank.

Hans now claimed that the bank must reduce the original loan to 180000 euros as the credit was given in violation of legislation implementing EU law. The bank admitted that a person with Hans’ income would normally not be allowed to borrow more than 180000 euros in 2013, and even less in 2015. There was, however, no prohibition against being generous, and Hans must repay the full loan.

Discuss Hans’ claim on the basis of relevant EU law. Would it make any difference if the Mortgage Credit Directive had been implemented by Hans’ home state?

Example 3: Kaia’s motorbike

Kaia, also a resident of Utopia, needed 10000 euros extra in order to buy a motorbike and she applied for a loan in the local bank. Kaia had a good salary and the bank granted her the loan without hesitation. The bank employee just asked Kaia to sign a loan contract; the document was five pages long and Kaia did not take the time to read it.

After a year, Kaia lost her job and she missed three monthly instalments of the loan. The bank then claimed repayment of the entire loan with interest at a rate of three times the original rate, calculated from one month after the first default of payment. Kaia was not able to pay this and argued that the bank had no right to such acceleration of the loan and default interest of this kind.

The bank referred to a clause in the contract which said that the entire loan was payable on month after a default, with an interest rate three times higher then the ordinary rate. There was even a final clause saying that “the borrower is aware that missing payments will have severe consequences for him or her, and the borrower has decided to take out the loan after having received information and explanations regarding the loan and the possible consequences”.

Discuss the legal issues based on relevant EU law.