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14/01/2010

If you take out a loan for goods that are not delivered, you should not need to pay off the loan

According to the European Court of Justice, a lender must refund the instalments you have already paid if the seller does not comply with his obligations

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Payments started but nothing was delivered

Mr S., an Italian consumer, bought a car from an Italian car dealer. Along with the purchase contract for the car, he signed an application form for a loan from a credit institution.

Because he had still not received his car after paying 24 monthly instalments, he suspended his repayment to the credit institution. Shortly thereafter, the car dealer went bankrupt, so the car was not delivered.

Mr S. then asked the credit institution to refund the payments.

The credit institution with which Mr S. had taken out the loan took him to court for non-payment. The lender, after all, considered that it was not liable for the failure to deliver the car. In accordance with European Directive 87/102/CE concerning consumer credit, the consumer has a right of recourse against the lender for failure to deliver goods, on condition that there is an exclusive relationship between the seller and the lender. In this case there was no exclusive relationship.

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The lender must refund the consumer if the seller does not comply with his obligations

The court that hears the case is not convinced that an exclusive relationship is a necessary condition for granting the consumer greater protection. The court has therefore requested a preliminary ruling on the matter from the European Court of Justice1. The ECJ has ruled that an exclusive relationship between a seller and a grantor of credit is not a requirement for a consumer to apply to a grantor of credit in the event of problems with a seller. The ECJ considers that this precondition would be at variance with the aim of Directive 87/102, which is primarily to protect the consumer as the weaker contracting party.

The new European legislation2 and current Belgian legislation already follow the same reasoning. The new consumer credit Directive, which offers greater protection to the consumer, offers the possibility of having recourse to the grantor of credit if the supplier of services or consumer goods for which you took out a loan is in breach of contract. There is one condition: you must first have unsuccessfully pursued the seller or supplier of the services.

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1 ECJ Judgment 23 April 2009, Scarpelli / NEOS Banca SpA
2 The 1987 Directive was repealed by Directive 2008/48/EEC, which must be transposed into law by all EU Member States by 12 May 2010.

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