Reasoning of the Court of Justice of the European Union regarding, among other issues, formalisation costs and arrangement fees for mortgage loans

In this Legal Briefing, we analyse the reasoning of the judgment of the Court of Justice of the European Union (the “Court“) of 16 July 2020 (the “Judgment“), in relation to the following issues concerning financing contracts entered into with consumers: (i) formalisation costs; (ii) arrangement fees; (iii) the limitation of actions for restitution; and (iv) the allocation of costs in legal proceedings resulting in a declaration of invalidity of a contractual term on the grounds of unfairness.

Judicial reasoning used in the Judgment

1.Formalisation costs

In this Judgment, the Court ruled that in the event of a declaration of invalidity in respect of an unfair contractual term that requires the consumer to pay the full costs of setting up and cancelling a mortgage, that term should not be enforceable against the consumer. In other words, it would be deemed not to have been included and could, therefore, entail, where appropriate, the obligation to refund the relevant amounts to the consumer.

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