Consumer Credit in Italy
(By Associazione Consumatori Piemonte )

Discredit to credit: everlasting problems about credit to consumers in Italy between present-day law and future changes

Italy, just such as other continental European countries, has a basically written law system funded upon Parliament and Government acts.
So, Italian banking law is mainly regulated by a consolidating act, enacted by the Government under Parliament control, identified as Legislative Decree number 385 of year 1993.
Credit to consumers is one of the subjects which the Decree takes care of: articles from 121 to 126 are especially relevant for our purpose, even if we can find also other norms spread around the Decree, the Civil Code and other laws.
Italian recent credit to consumers law was intended to enact EC directive 87/102/EEC, and therefore make Italian law consistent with communitarian legislation.
However, Italy government judged that the directive text offered insufficient consumer protection, and so chose to add new provisions going someway beyond compulsory ones. For instance, according to article 124 a credit agreement is void for lacking of an essential term if there isn’t an analytical description of the goods or services which are bought with the money provided by the financing company. Moreover, the financing company has to apply a law-limited interest rate if there’s no indication of it in the credit agreement. Our legislation, according to UE provisions, has become very specific about ways of indicating the exact amount of interests to be paid in an understandable form. So, there are two different rates to be indicated in a contract: the T.A.N., or annual nominal rate, and the T.A.E.G., which includes expenses of various types, and which is intended to indicate the annual global real rate.
Anyway, even if present day law has been intended to guarantee to consumers a good standard of protection, during last ten years we’ve noticed as some relevant problems have remained still unsolved.
A first, major, problem is about establishing a joint and several civil liability for the supplier of goods and services and the creditor.
Article 125, enacting article 11, second paragraph of Directive 87/102, provides that, in case of breach of contract from the supplier’s side, the consumer can promote a judicial action against the credit company for obtaining the interruption of payments and the restitution of the sums already paid only when there’s an exclusive pre-agreement between the grantor of the credit and the supplier of goods or services.
Given that it’s up to the consumer to prove the existence of such an agreement, this has shown to be a sort of “devilish proof”, as Italian lawyers call proofs which are quite impossible to demonstrate, and it’s of little use for the consumer to maintain his rights against the supplier.
In fact, he’ll be no longer able to stop payments by his own, as he could have the right to do if he were paying directly the supplier according to article 1460 of the Civil Code. Instead, he will have to complete the payments to the creditor and then bring the supplier to Court asking him for the restitution of the money.
No matter what EC Directive was intended to establish, consumers’ rights are de facto diminished when a credit agreement is signed: the risk will fall entirely upon his shoulders where the grantor of the credit will be able to ask him to continue with his payments.
As the supplier has financial problems of his own, or even goes bankrupt, things go even worse: not only shall the consumer have to start and win a lawsuit, but he will risk to get from it just a piece of paper of no use. In fact, no specific protection is given to the consumer in bankruptcy law, and he’ll be postponed to a long list of subjects which are preferred to him in the distribution of supplier’s money and goods. If their credits are large enough, he will possibly get nothing at all from the whole judicial proceeding.
However, in some way case law has tried to supply to written law’s defaults. Both the doctrine of contracts linkage (we call it “collegamento negoziale”) and its application to credit to consumers contracts are well-established in Italian courts almost since the sentence number 474/1994 of our Supreme Court, the “Corte di Cassazione”. Now, a contracts linkage can be found whenever a plurality of contracts has a unique scope. Whenever a contract linkage is established, whatever fact would be relevant for one of the linked contracts will produce its effects on both. Italian courts have recognized that, if it’s true that article 125 of banking law consolidating act regulates a specific case of contracts linkage established by written law, there are no limitations for the judge to individuate, on a case-by-case method, other examples of contracts linkage in credit to consumers field.
Now, the sentence 474/1994 has recognized that the so-called “mutuo di scopo”, or finalized credit agreement, is by its own a form of linked contract. On the other side, the sentence established that some elements of fact should be present in order to prove that a credit agreement signed by a consumer in order to buy a specific good or service could be considered as a finalized credit agreement and therefore a linked contract.
A second sentence by the Supreme Court, number 5966/2001, further stated that, when a link is proved between the credit agreement and the selling contract, a contract clause which excludes civil liability of the creditor for supplier’s defaults is void under the articles of Civil Code enacting Directive 93/13/CEE.
In this way, the final result of this case-made law has been to add other circumstances, besides the exclusive pre-agreement case, to those which can prove the existence of a contracts linkage in credit to consumers field, and therefore extend the liability of the creditor for the defaults of the supplier.
However, this interesting evolution has someway stopped half-way: a credit agreement between a creditor and a consumer should in our opinion be always considered as linked with the contract between the consumer and the supplier: in fact, by italian law and according to Decree 385/1993, the credit agreement must contain an analytical description of the goods or services whose buying the credit is given for.
Recently, Movimento Consumatori has promoted a judicial action against an important financing company which used contract clauses providing the exclusion of its liability for whatever default by the supplier of goods or services and involving a declaration of recognizance by the consumer of the non existence of an exclusive pre-agreement between the creditor and the supplier. The lawsuit was intended to obtain a declaration of abuse for such clauses, according to the articles of Civil Code enacting Directive 93/13/CEE, on the basis of an undue liability limitation. In fact, we insisted for the thesis of a contract linkage in re ipsa, involving the necessary joint liability of the supplier and of the creditor.
Turin Tribunal confirmed some points but rejected our demand. According to the sentence, the contract linkage doctrine is vital and finalized credit agreements are in se linked to selling contracts.
Moreover, the sentence confirms that the presence of an exclusive pre-agreement between the creditor and the supplier is just one of the possible elements to be used in order to recognize the presence of a finalized credit agreement. Anyway, the sentence also confirms that from the sole analytical description of goods and services in the credit agreement there’s no direct inference to its definition as “finalized”. The sentence has at present to be revised by Turin Court of Appeal, so the trial isn’t ended yet.
However, until now problems haven’t yet been solved neither by written law nor by case law. All law reform projects tending to the extension of the creditor liability couldn’t find success in Parliament, also because of the strenuous opposition of financing companies and of the whole banking system. Only last year, when European Commission presented her proposal for a new directive concerning credit for consumers, it appeared that the simpler solution was at hand. As it’s known, article 19, 2nd paragraph, should provide for a joint and several liability principle whenever the supplier of goods or services acts as an intermediate between the creditor and the consumer. In this way, the whole issue of proving the existence of an exclusive agreement between the creditor and the supplier, according to article 125, as also proving other elements in order to determine the presence of a finalized credit agreement, according to Supreme Court case law, would be over.
In the last year, the first reform project on the point entirely based on the new proposal by EC was presented by consumers’ associations, but still has not reached Parliament.
Anyway, there are hopes that finally the only complete solution to this serious problem would soon be real, and that for the first time the existence of a credit agreement shall really not affect the rights of the consumer in any way.
Besides this first problem, however, there are still others to be solved, of a more “social” and less “juridical” nature.
Among others, some financial operators use to combine a general credit agreement (which is not done for specific consume purposes and is often asked to repay previous debts) with a second contract intended to buy a “card” which should provide different services, usually insurances and benefits. The “card” is realized and sold by a different company which is directly linked with the financing one, which realizes a double profit. Moreover, is usually difficult to be sure of the exact nature of the services provided by the card, which often will never be used by the consumer. In this way, the consumer who’s in need of money will subscribe a contract with a quite low nominal rate, but will have to buy a service he wouldn’t have ever got and whose profit will go entirely to the credit company controlled firm.
Another problem to be solved is the existence of data-bases which contain informations about previous delays in payments or other elements from which credit companies can desume an individual is a “bad payer” and therefore refuse to grant him credit. If the collection of such infos is useful to companies, is still often a sort of free land where is very difficult for the consumer to get infos about himself. The collection of datas is regulated in Italy by law 675/1996, which provides that a specific written consent has to be given by a person in order to have his personal datas to be collected by another subject. This consent shall be informed, that is, the person has to be informed about the specific use it will be done of his datas (personal archive, marketing, etc.). Now, credit companies always ask consent to give personal datas of consumers to the few that run huge data-bases which are free to look into for other credit companies. In a matter of fact, always infos about bad payers are incomplete, wrong or not up-to-date: for example, the consumer hasn’t payed indeed but for a rightful reason communicated to the company by mail, or anyway for a reason susceptible to be verified in a lawsuit, as it could be an assumed unvalidity of the contract. Well, too often whatever this reason could be the consumer will find himself in the list of “bad payers” and he won’t be able to get cedit anymore. More frequently, the consumer payed with an unjustified delay, but payed at last, and still his name remains in the list of bad payers again. Law grants the right to have personal datas cancelled on request, but as a matter of fact it’s still too often long and difficult to have this right complied by companies.
So, when credit to consumers becomes more and more important in italian daylife, many old problems still remain unsolved and grow bigger as the number