The Court of Justice holds that the consumer credit directive prevents banks from calculating interest on the portion of a loan earmarked for paying credit costs such as insurance premiums. The drawn-down amount must exclude sums the consumer never receives
The Court of Justice ruled in Case C-744/24 on 23 April 2026, which originated from Polish proceedings, where a consumer brought a claim against Bank Polska Kasa Opieki SA (Bank Pekao) over a credit agreement that included an insurance premium within the loan total. The bank then calculated interest on the full nominal loan amount, including the portion the consumer never received because it went directly to pay the premium.
Directive 2008/48/EC on consumer credit defines several key terms that came into play during this trial. For instance, Article 3(l) defines the total amount of credit, while Article 3(j) defines the total amount payable by the consumer. The Court found that the amount earmarked for paying credit costs does not form part of the amount of credit drawn down by the consumer. The consumer does not receive those funds. The money moves directly to cover costs the bank imposes as a condition of the credit. Including that amount in the interest calculation base distorts the true cost of borrowing and misleads the consumer on the effective annual interest rate.
Article 10(2) of the Directive requires credit agreements to state the total amount of credit in a clear and transparent way. The Court held that EU law precludes national provisions or contractual terms allowing a bank to charge interest on amounts allocated to paying credit costs. Polish courts handling similar disputes, and credit agreements across the EU where banks bundle insurance premiums or arrangement fees into the principal, should apply this ruling. The second preliminary question became moot in light of the Court’s answer to the first.
