The Court of Justice of the European Union has ruled in Joined Cases C-38/21, C-47/21 and C-232/21 | BMW Bank and others considering the interpretation of the Consumer Rights Directive (2011/93/EU) (CRD).

Several consumers brought proceedings before the German courts saying that their withdrawal from leasing agreements or credit agreements with banks linked to car manufacturers (BMW Bank, Volkswagen Bank and Audi Bank) were valid. The agreements were for car leasing (with no obligation to purchase) and to finance second-hand cars.

For the leasing agreement, the consumer had visited the premises of a car dealer authorised to provide information about the agreement, which the consumer and bank then concluded directly via distance communication. For the car finance agreements, the car dealers acted as intermediaries for the banks.

The consumers cancelled the agreements months or years after they had entered into them. One of them exercised his right of withdrawal after the loan had been repaid in full. The consumers considered that the 14-day withdrawal period in the CRD had not started to run because they were not sufficiently informed of their rights and obligations when the agreement was concluded. 

The banks argued that a withdrawal after such a length of time must be classified as abusive. The case was referred to the CJEU for a ruling on the interpretation of the CRD.

The Court said that contracts for services of a "banking" or "credit" nature fall within an exemption from the scope of the CRD. In addition, it said that a lease of a car from a finance company to a consumer, with no obligation for the consumer to purchase the car when the lease expired, did not fall within the exemption. This was because:

  • Banking services are traditionally carried out by "high street" banks, and do not include leasing cars.
  • Although the lease involved a credit element, its "main purpose" was rental. The consumer was not required to buy the car at the end of the lease. In addition, they did not bear the full amortisation of the car's purchase costs or risks around its residual value on expiry.

The court considered if the lease was a distance or off-premises contract under the CRD so that it attracted cancellation rights. A key requirement of a distance contract is that it is concluded without the simultaneous physical presence of the trader and the consumer and exclusively using one or more means of distance communication. An off-premises contract must be concluded away from the trader's business premises.

The finance company did not deal directly with the consumer. A car dealer negotiated terms and sent the consumer's contract application to the finance company. 

According to the court, if an intermediary, such as the car dealer, is visibly negotiating in the name, and on behalf, of the trader, the intermediary’s actions should be treated as the trader’s actions. In principle, the contract did not fulfil the criteria required to be either a distance or off-premises contract. As a result, it would be an on-premises contract and the CRD cancellation rights would not apply.

Finally, the court stated that even if cancellation rights had applied, the exemption from the CRD cancellation right for "provision of … car rental services … for a specific date or period of performance" would have affected things. Nothing in the CRD implied that only a short-term rental was exempt and the reasoning behind the exemption (that the trader would have put aside capacity which could not easily be resold) applied.

The decision is not binding on the UK courts, but they may take it into consideration if ruling in similar situations.