On 13.03.2025, the Court of the European Union issued a ruling that will prevent fast loan companies from bypassing the law using guarantor agreements. It’s common for a fast loan to be offered only if the consumer agrees to pay a guarantor’s fee, the total amount of which can exceed 75% of the loan amount. This often involves the consumer signing a separate guarantor agreement, usually with a company chosen by the lender, which may be a subsidiary. By using these separate agreements, lenders can avoid the legal limit on loan-related expenses. The ruling on case C-337/23 will have a major impact on how national courts handle similar fast loan cases with a guarantor.
Your Right to Information Before Signing a Guarantor Agreement
The ruling emphasizes that consumers must be fully informed of all costs related to a guarantor agreement before they sign it. Even though the guarantor agreement is a separate contract from the loan, the costs for a guarantor must be included in the loan’s total cost breakdown. This includes interest, fees, commissions, and any additional charges, which must also be reflected in the loan’s Annual Percentage Rate (APR).
What You Need to Know About APR
The Court clarified that the APR must be presented in full, with no omissions. Consumers must be informed of all types of costs included in the APR, as outlined in EU Directive 2008/48/EC. If a lender fails to provide full APR information and the loan agreement is declared void in court, the consumer will not owe any interest or extra charges. The only amount to repay will be the original loan principal.
Unfair Clauses in Guarantor Agreements
The Court also ruled that national courts can declare unfair clauses in guarantor agreements, where such are imposed as a condition for receiving the loan. However, if there’s only doubt that a clause stems from unfair commercial practices, that alone isn’t enough to void the clause. Courts must investigate further to determine if the clause is indeed unfair.
If you’ve obtained a fast loan by also signing a guarantor agreement and need legal assistance, don’t hesitate to reach out to us.
