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CJEU ‘VFK’ case: whether Debt Rescheduling Free of Charge

The CJEU has issued its decision in Verein für Konsumenteninformation (C-127/15), on whether debt rescheduling is ‘free of charge’ where the debt collection agency’s fees are added to the account.

Consumers had entered a debt rescheduling agreement with a debt collection agency which was acting on behalf of the lender. The Consumer Credit Directive 2008/48/EC does not apply to credit agreements which relate to the deferred payment, free of charge, of an existing debt. Therefore the debt rescheduling agreement would be outside the scope of the Directive if it was ‘free of charge’.

Under the rescheduling agreement, the consumers were first obliged to pay the agency’s costs, before discharging their obligations to repay the outstanding balance. However, this requirement to pay the agency’s fees was a new obligation that was not contained in the original credit agreement. As a result, the CJEU concluded that the rescheduling agreement could not be described as ‘free of charge’.

On a separate issue, the CJEU found that the debt collection agency was a ‘credit intermediary in an ancillary capacity’ and as such, it did not owe any pre-contractual information obligations. However, the lender was obliged to ensure that such information reached consumers.

The full decision can be found here.