Opening Fee on Mortgage Loans: Analysis of the CJEU Ruling of March 2023
The origination fee for mortgage loans has been the subject of numerous judgments handed down by the Courts of Justice in recent years. However, different interpretations gave rise to an oscillating jurisprudence, which led to several preliminary rulings being referred to the Court of Justice of the European Union (CJEU), which recently published the Judgment of 16 March 2023 resolving them and clarifying the national panorama in this respect. In this article, we analyse the key points of the ruling and its implications for mortgage loans.
The arrangement fee is not the main benefit of the mortgage loan contract.
The CJEU ruling of 16 March 2023 establishes that the arrangement fee cannot be considered as an essential benefit of a mortgage loan, as national case law had ruled in the past. Instead, it is a non-essential clause, as an ancillary payment, which is subject to review for unfairness and on which the burden of proof in the field of consumer law must be placed on the bank.
This point is important, as it allows the arrangement fee to be subject to review of its content if it is deemed to be unfair. In this way, consumers are protected against possible abusive practices by financial institutions.
The arrangement fee may be subject to the transparency check.
The CJEU ruling of 16 March 2023 also establishes that the arrangement fee can be subject to transparency control. This means that, especially in the case of mortgage loans, the bank must comply with its information obligation. Moreover, this obligation implies not only that the clause in question is understandable to the consumer on a grammatical level, but also that the contract sets out in a transparent manner the concrete functioning of the mechanism to which the clause in question refers, so that the consumer is in a position to assess, on the basis of precise and intelligible criteria, the economic consequences for him.
In other words, the bank must prove the existence of prior information to that effect, failing which the arrangement fee will be deemed to be unfair. This point is important, as it ensures that consumers receive clear and detailed information on the costs of the mortgage loan, which will allow them to make an informed decision on whether or not to accept the loan.
In short, the ruling provides important protection for consumers against a banking practice that is widespread in some EU countries.