European Court of Justice (ECJ) ruling: Revocation of car loans and car leasing - this is how it works



European Court of Justice (ECJ) ruling: Revocation of car loans and car leasing - this is how it works

In a ruling against the VW Bank, Skoda Bank and BMW Bank, the ECJ found fault with several incorrect statements in the loan documents, thereby reviving the “revocation joker”. The reasons for the ruling are serious formal errors in the loan documents. These defects allow private customers to revoke the concluded loan. This possibility also exists if the loan was concluded years ago and the financing has already expired.
The errors criticized by the ECJ are not only found in the defendant banks. Instead, they can be found in almost all financing agreements of the past ten years, regardless of the credit institution. This means that millions of loan agreements are likely to be affected.

For example, the ECJ judges criticize the fact that the default interest rate is not clearly stated. Almost every contract state that the default interest rate is "5 percentage points above the respective prime rate”. However, most customers neither know how high this is, nor how it is set and adjusted. Consequently, at least the default interest rate applicable at the time of the contract should have been stated as a percentage.
In addition, the method for calculating the early repayment penalty should have been stated in an easily comprehensible manner. The banks have not yet compiled with this requirement either.
Both aspects are reasons for a possible recall.

In the past, costumers were able to use the revocation joker to revoke their construction financing and save money. However, the current ruling does not apply to mortgage loans, but only to private loans of other forms.
In the case of a car loan, revocation would in theory mean that the bank would have to take back the financed vehicle and reimburse the customer for the purchase price minus compensation for the loss in value. Thus, the customer would receive significantly more money for his car than it would be worth on the used car market. However, since banks are generally not interested in a large stock of used cars, the practice is likely to be different. Thus, in quite a few cases, there is likely to be financial compensation in favor of the customer.

However, those affected should not declare revocation on their own initiative. Instead, they should have their contract documents checked by a specialized lawyer and coordinate further action with him. It is still unclear how the automotive banks will react to the ruling.

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