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European Review of Private Law 3-2005 [383–404] © Kluwer Law International | Printed in the Netherlands

Consumer Guarantees in the Future Consumer Credit Directive: Mandatory Ban on Consumer Protection?

PETER ROTT*

Keywords: Consumer Guarantees, Maximum Harmonisation, Underprotection

Abstract: The proposed new Consumer Credit Directive will not only deal with credit contracts but also with surety agreements, including consumer guarantees. The latter will for the first time undergo harmonisation at EC level, and this will be in the form of total harmonisation. However, the Commission never undertook serious comparative analysis of the Member States’ protection of consumer guarantors, and the proposal does not take account of the existing levels of protection. In contrast, the proposed protective instruments are incomplete and rather weak, and thus they would considerably reduce the protection of the guarantors in various Member States if the Directive disallowed more stringent national rules.

Résumé: La proposition de nouvelle directive en matière de crédit à la consommation concerne non seulement les contrats de crédit aux consommateurs mais également les contrats de sûreté, y compris les contrats de cautions. Ces derniers sont pour la première fois concernées par l’harmonisation au niveau communautaire, et ce sous forme d’harmonisation totale. La Commission n’a toutefois jamais entrepris d’analyse comparative sérieuse des instruments législatifs de protection des garants de consommateurs dans les Etats membres, et la proposition ne tient pas compte des dispositifs de protection existants. Les instruments de protection proposés sont au contraire incomplets et plutôt faibles, et ils réduiraient considérablement la protection des garants dans certains Etats membres si la directive interdisait des dispositions de protection nationales plus rigoureuses.

Zusammenfassung: Die vorgeschlagene neue Verbraucherkredit-Richtlinie wird nicht nur Verbraucherkreditverträge, sondern auch Sicherungsverträge einschließlich der Verbraucherbürgschaften regeln. Letztere werden erstmalig auf EG-Ebene harmonisiert, und dies in Form der Vollharmonisierung. Die Kommission hat allerdings nie einen ernsthaften Rechtsvergleich der Vorschriften der Mitgliedstaaten zum Schutz der Verbraucher-Bürgen durchgeführt, und der Vorschlag bezieht die bestehenden Schutzvorschriften nicht ein. Im Gegenteil sind die vorgeschlagenen Schutzinstrumente unvollständig und ziemlich schwach, und sie würden den Bürgenschutz in einigen Mitgliedstaaten deutlich verringern, wenn die Richtlinie weiter reichende nationale Schutzvorschriften untersagen würde.

1Introduction

Although first proposals were drafted at EC level in the 1970s,1 surety agreements as such still have not been subject to specific regulation in EC consumer law. In Berliner Kindl,2 the European Court of Justice (ECJ) decided that surety agreements cannot

* Junior Professor for Private Law with a focus on European Private Law, University of Bremen.

1See A. SÖLTER, Die Verbraucherbürgschaft, Duncker & Humblot, Berlin 2001, p 171.

2ECJ 23 March 2000, Case C-208/98 Berliner Kindl Brauerei AG v. Andreas Siepert [2000] ECR I-1741.

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be viewed as credit agreements in the terms of the Consumer Credit Directive 87/102/EEC.3 Only if surety agreements are concluded outside the traders’ premises, and only if they guarantee for consumer credit contracts, do they come under the protective system of the Doorstep Selling Directive 85/577/EEC,4 as the ECJ held in Dietzinger.5 Thus, the protection of the guarantor lies in the competence of the Member States, and only few of them have as yet introduced specific protective legislation. This may change if the Commission’s plan to modernise the Consumer Credit Directive succeeds since the proposal of September 20026 includes the protection of consumer guarantors granting surety, both personal and in material form. The proposal has been harshly criticised and amended by the European Parliament7 that was strongly influenced by the banking industry.8 The Commission therefore adopted an amended proposal on 28 October 2004.9 Whilst the provisions on consumer credit contracts have been intensely discussed in legal writing, the protection of guarantors under the proposed Directive has received very little attention.

Considering the two proposals by the Commission and the resolution by the European Parliament as well as the political debate, this paper focuses on personal

3Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, O.J. 1987, L 42/48.

4Council Directive 85/577/EEC on contracts negotiated away from business premises, O.J. 1985, L 372/31.

5ECJ 17 March 1998, Case C-45/96 Bayerische Hypothekenund Wechselbank AG v. Edgar Dietzinger [1998] ECR I-1199, annotated by H.-W. MICKLITZ, ‘Anmerkung’, EuZW (Europäische Zeitschrift für Wirtschaftsrecht) 1998, pp 253-254. See also S. SCHWARZ, Bürgenschutz durch deutsches und europäisches Verbraucherrecht, Nomos, Baden-Baden 2001, pp 38 et seq.

6Proposal for a new Directive on credit for consumers, COM(2002) 443 final of 11/9/2002, O.J. 2002, C 331 E/200. For an overview and criticism see S. KAISER, ‘Vorschlag der EU-Kommission für eine Überarbeitung der Verbraucherkreditrichtlinie – Darstellung der wesentlichen Änderungen’, VuR (Verbraucher und Recht) 2002, pp 385 et seq.; M. ROHE, ‘Privatautonomie im Verbraucherkreditrecht wohin?’, BKR (Zeitschrift für Bankund Kapitalmarktrecht) 2003, pp 267 et seq.; A. DANCO, ‘Die Novellierung der Verbraucherkreditrichtlinie’, WM (WertpapierMitteilungen) 2003, pp 853 et seq.; K. RIESENHUBER, ‘Information – Beratung – Fürsorge’, ZBB (Zeitschrift für Bankrecht und Bankwirtschaft) 2003, pp 325 et seq.; J.-U. FRANCK, ‘Bessere Kreditkonditionen für Verbraucher durch mehr Regulierung?’, ZBB 2003, pp 334 et seq.; K. NEMETH & H. ORTNER, ‘The Proposal for a new Directive concerning Credit for Consumers’, 4

GLJ (German Law Journal) (2003), pp 801 et seq.

7See the report of the Committee on Legal Affairs and the Internal Market, A5-0310/2003, and the legislative resolution of the European Parliament, A5-0224/2004. See also the analysis by M. HOFFMANN, ‘Der Diskussionsstand zur Reform der Verbraucherkreditrichtlinie, BKR 2004, pp 308 et seq. For a critical comment on the draft report by MEP Wuermeling, see U. REIFNER, ‘Konsumentenkreditrichtlinie im Europaparlament – Zurück zu den Siebzigern?’, VuR 2004, pp 85 et seq.

8See U. REIFNER, VuR 2004, p 85 at 90-91.

9COM(2004) 747 final.

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guarantees. It first analyses the respective regulatory interest and competence of the EC (section 2) and then discusses the envisaged protective instruments and their usefulness (section 3.1). After revealing the lacunae of the proposal with a view to comprehensive protection of the consumer guarantor (section 3.2), the paper turns to the crucial question whether or not Member States will still be free to adopt additional instruments to protect the consumer guarantor once the Directive will come into effect (section 4). Finally, the results of the assessment are tested against the requirement of a high level of consumer protection, as embedded in Article 95 EC (section 5).

2 Regulatory Interest and Competence of the EC

2.1Consumer Protection

The Commission’s interest in regulating consumer guarantees does not become entirely clear when reading the first proposal and the preceding documents. Most probably, the Commission was motivated by the controversial discussions around the Berliner Kindl case that was certainly correctly decided by the ECJ but demonstrated a serious gap in consumer protection in Germany.10 In its first proposal, the Commission explicitly identified this gap, mentioning Berliner Kindl in a footnote.11 In other words, the inclusion of consumer guarantors in the protective system of the future Consumer Credit Directive was originally meant to be a consumer protection measure.

2.2Internal Market

However, the EC does not have the competence to regulate consumer protection as such. It can only do so under Article 95(1) EC which allows measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.12 According to Article 95(3) EC, the Commission should take as a base a high level of consumer protection when proposing a measure, and Article 153 EC has extended this duty to the EC.13 The internal market argument has been explicitly spelt out by the Commission in order to justify a more intense regulation of consumer credit law in a new Directive.14 The Commission even aims for totally

10 See also N. REICH, ‘Verbraucherkredit’, in: N. Reich & H.-W. Micklitz, Europäisches Verbraucherrecht, 4th ed., Nomos, Baden-Baden 2003, p 735 at 740.

11See the explanation on Article 3 of the proposal (n. 6 above).

12For an assessment of the use of Article 95 EC for adopting consumer law Directives, see P. ROTT, ‘Minimum harmonisation for the completion of the internal market? – The example of Directive 1999/44/EC’, CMLR (Common Market Law Review) 40 (2003), pp 1107 et seq., with further references.

13See J. STUYCK, ‘European Consumer Law after the Treaty of Amsterdam: Consumer Policy in or beyond the Internal Market?’, CMLR 37 (2000), p 367 at 379.

14For critical comments on the insufficient empirical research into the European consumer credit market see J.-U. FRANCK, ZBB 2003, p 334 at 339-340; M. HOFFMANN, BKR 2004, p 308 at 310.

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harmonising this field of law, with a view to the functioning of an EC wide credit market,15 although this aspect of the initiative is being opposed by the European Parliament.16 In contrast, the proposal does not explain why the harmonisation of the law on consumer guarantees is a necessary ingredient of the internal market.17

In EC consumer law, two mechanisms for making the internal market work are present: reducing transaction costs for traders,18 and increasing the consumers’ confidence.19 The Commission has used both arguments in order to establish its competence under Article 95(1) EC to regulate consumer credit law.20 Regulating the law on consumer guarantees may be necessary not for themselves but as an annex to regulating consumer credit law. Today, many consumers do not avail of property that could be used as surety,21 and procedures for using property as surety are complicated and expensive as they frequently involve public notaries. Thus, the third party guarantee has become the most common surety, in particular in consumer credit law. One might go as far as to say that, at least in German banking practice, they are inherently linked with consumer credit contracts.22 Thus, with diverging national rules on consumer guarantees, not only the conclusion of guarantee contracts but also the conclusion of consumer credit contracts may be rendered more difficult. A number of Member States have already introduced special rules for the protection of consumer guarantors,23 and others may

15See the proposal (n. 6 above), at 1. and 2.2. See also K. LANNOO & A. DE LA MATA MUÑOZ,

Integration of the EU Consumer Credit Market, CEPS Working Document No. 231, November 2004, available at <http://www.ecri.be>.

16See the resolution (n. 7 above), Amendment 30. See also the critical comments by A. DANCO, WM 2003, p 853 at 858 et seq., M. ROHE, BKR 2003, p 267 at 273, and U. REIFNER, ‘Empfehlungen zum Vorschlag einer EU-Richtlinie zum Konsumentenkredit’, VuR 2004, p 11 at 13.

17The only aspect of differing national rules on consumer guarantees that the Commission mentions is that ‘the legislations of the Member States differ considerably with regard to waiting periods before any action can be taken in respect of (…) guarantors’. See the proposal, at 2.2.

18See G. WAGNER, ‘The Economics of Harmonization: The Case of Contract Law’, CMLR 39 (2002), p 995 at 1014.

19See M. TENREIRO, ‘Guarantees and After-Sales Service: Brief Analysis of the Green Paper Presented by the European Commission’, Consumer Law Journal 1995, p 79 at 81.

20See the proposal (n. 6 above), at 1.2.

21See F. VON ROTTENBURG, ‘Verhaltenspflichten der Kreditinstitute bei der Vergabe von Verbraucherkrediten’, ZHR (Zeitschrift für das gesamte Handelsrecht) 153 (1989), p 162 at 171.

22See H.-W. MICKLITZ & P. ROTT, ‘Konsumkredit, Überschuldung und Schuldensanierung in der Bundesrepublik Deutschland’, JKR (Jahrbuch des Schweizerischen Konsumentenrechts) 1997, p 131 at 136-137. For France, see I. HAUSCHILD, Der Schutz des Bürgen, VVF, Munich 1997, pp 33-34. This seems to be different in other Member States such as the United Kingdom where mortgages play a far more important role.

23See the Commission’s Report on the operation of Directive 87/102/EEC for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, COM(95) 117 final, at 106 f. See also the overview provided by A. SÖLTER (n. 1 above), pp 31 et seq.

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well follow in the near future24 since the regulatory gap has become obvious, not least with the Dietzinger and Berliner Kindl cases. To name but a few, the UK has protected the consumer guarantor for 30 years, through sec. 105 et seq. of the Consumer Credit Act 1974 and the Consumer Credit (Guarantees and Indemnities) Regulations 1983.25 In France, consumer guarantees are subject to specific regulation by the Code de la consommation.26 In Germany, some German lower instance courts extended in the 1990s the duties of creditors under the former Consumer Credit Act (Verbraucherkreditgesetz) to consumer guarantees,27 and scholars have proposed to amend the Consumer Credit Act accordingly.28

Overall, the aim of making the internal consumer credit market work may justify regulation of consumer guarantees as well. All commentators have welcomed, in principle, the inclusion of consumer guarantees into the scope of the proposal.29 However, and this appears consequent from an internal market perspective although incomprehensible from a consumer perspective,30 the European Parliament insisted on limiting the scope of application to guarantees for the repayment of consumer credits.31 This is also in line with the ECJ judgment in Dietzinger, and the Commission has amended its proposal accordingly.32

3Instruments for the Protection of Guarantors and Lacunae of the Proposed Directive

A caveat at the outset: For three reasons, it is rather difficult to analyse the protection granted by the proposed Directive to guarantors and its lacunae. Firstly, the details of

24 See the summary document by GD SANCO, available at <http://europa.eu.int/comm/ consumers/cons_int/fina_serv/cons_directive/cons_cred1a_en.pdf>, 16.

25S.I. 1983 No. 1556. See F. PUTZO, Die Anwendbarkeit des Verbraucherkreditgesetzes und des Gesetzes über den Widerruf von Haustürgeschäften und ähnlichen Geschäften auf Bürgschaften, Diss. Frankfurt a.M., 2001, pp 53 et seq.

26See I. HAUSCHILD (n. 22 above), pp 40 et seq.

27See LG Neubrandenburg 9.10.1996, WM 1997, p 817; LG Köln 2.10.1997, ZIP (Zeitschrift für Wirtschaftsrecht) 1997, p 2007; LG Köln 13.11.1997, WM 1998, p 172; against OLG Stuttgart 22.7.1997, NJW (Neue Juristische Wochenschrift) 1997, p 3450; OLG Hamm 12.11.1997, WM 1998, p 171; OLG Rostock 11.12.1997, WM 1998, p 446.

28See S. SCHWARZ (n. 5 above), p 179. For a proposal for an EC Directive concerning the protection of consumer guarantors see A. SÖLTER (n. 1 above), p 180-181.

29See, for example, the comment by the GERMAN MINISTRY OF JUSTICE of January 2003, available at <http://www.bmj.bund.de/images-/11590.pdf>.

30See N. HORN, ‘Bürgschaftsrecht 2000’, ZIP 2001, p 93 at 94. National laws differ on this point: Whilst English and French law only protect a consumer the guarantees for the repayment of a consumer credit, Austrian law does not distinguish between consumer credits and business loans that are guaranteed for. See A. SÖLTER (n. 1 above), p 40.

31See the resolution (n. 7 above), Amendments 38 and 39.

32COM(2004) 747 final, at 4.3.1. Article 3 (2) of the amended proposal also exclude surety agreements that correspond to credit agreements that are excluded from the scope of the Directive under Article 3 (2). For critical comments on Article 3 (2) see U. REIFNER, VuR 2004, p 85 at 86.

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the amended proposal of 28 October 2004 are very unclear since the Commission has not provided a consolidated version of the proposal yet but only described the changes made to the first proposal.33 Secondly, the terminology of the Directive is confusing. In some cases, the ‘consumer’ only means the borrower, whereas in other provisions it encompasses both the borrower and the guarantor. And thirdly, the provisions dealing with the guarantor have only been supported by few explanations in the proposal, so that the following analysis is necessarily partly based on speculation.

Instruments for the protection of guarantors may be grouped as follows: (1) procedural requirements, (2) limitations to the content of the guarantee contract, (3) protection related to the development of the scope of the guarantee and (4) protection from overly easy or early enforcement of the guarantee. The Commission’s proposal on a new Consumer Credit Directive includes a variety of instruments, partly identical to those applied to borrowers and partly specific rules that only apply to guarantors.

Apart from rules directly aimed at protecting the guarantor, guarantors would of course enjoy the indirect benefit of better protection of the borrower. If borrowers are able to repay all the money they borrow, the guarantor will not be held liable. With respect to the protection of borrowers, the proposal has undergone an amazing development. The first proposal was opposed by the banking industry as being far too protective in combining and accumulating protective instruments from various legal orders.34 The amended proposal, in contrast, is being criticised in first statements by the consumer side as a serious drawback from the current level of protection back to the state of the 1970s.35 Thus, the indirect benefit for the guarantor may be doubted; certainly it cannot replace direct specific instruments that protect the guarantor.

3.1Procedural Requirements and Bans on Concluding Guarantee Contracts

3.1.1No Prohibition of Doorstep Selling

The Commission’s first proposal intended to ban doorstep selling of credits, and also concluding guarantee contracts away from business premises. As far as consumer credit is concerned, such a rule is known, for example, in Dutch law. Doorstep selling has caused massive problems in the banking sector, at least in Germany, for many years, and the ECJ cases of Heininger,36 Schulte37 and Crailsheimer Volksbank38

33U. REIFNER of the Institut für Finanzdienstleistungen e.V. (IFF) has made the laudable effort to draft a consolidated version on the basis of the Commission’s explanation, available at <http://iff.money-advice.net>.

34See, for example, M. ROHE, BKR 2003, p 267 at 273.

35See, in particular, U. REIFNER, VuR 2004, pp 85 et seq.

36ECJ 13 December 2001, Case C-481/99 Georg and Helga Heininger v. Bayerische Hypound Vereinsbank [2001] ECR I-9945.

37Case C-350/03 Elisabeth Schulte and Wolfgang Schulte v. Deutsche Bausparkasse Badenia AG; see also the Opinion of AG Léger of 28/9/2004.

38Case C-229/04 Crailsheimer Volksbank eG v. Klaus Conrads, Frank Schulzke and Petra SchulzkeLösche and Joachim Nitschke, O.J. 2004 C 201/9.

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illustrate the issue very well. As already mentioned, the consequences of guaranteeing the repayment of a third parties debts only materialise after a long period of time. Thus, the limited right to withdrawal may not prove overly helpful, and a ban of guarantee contracts concluded at the doorstep may be a useful tool for prevention.39 Nevertheless, the Commission dropped this proposal because it found no support in the European Parliament.40 One rather formal argument was that the issue should be regulated in the context of the Doorstep Selling Directive 85/577/EEC.41

3.1.2Responsible Lending

For the first time in a number of national consumer credit laws, the Directive will introduce the requirement of responsible lending. This was probably the most opposed issue in the first reactions from the banking industry,42 and also from academics.43 The respective rule has moved from Article 9 of the first proposal to Article 6 of the amended proposal. It includes the requirement for the creditor to assess the consumer’s creditworthiness on the basis of information provided by the consumer and, where appropriate, on the basis of a consultation of the relevant databases.44 In return, the consumer is obliged to provide relevant information.45 This latter obligation was only introduced with the amended proposal whereas the consumer was, under the first proposal, merely obliged to give information the creditor asked for, i.e. to answer questions correctly.46

The duty of responsible lending shall prevent consumers from borrowing if they can be predicted to get into difficulties with the repayment of their loans.47 Therefore, it may be the primary tool to prevent overindebtedness, and it may reduce the number of cases in which creditors will have to approach those who guaranteed for the repayment of a loan. With respect to the protection of the guarantor, this

39See also U. REIFNER, VuR 2004, p 11 at 12; VERBRAUCHERZENTRALE BUNDESVERBAND E.V., ‘Notwendiger Korrekturund Ergänzungsbedarf einer neuen Verbraucherkreditrichtlinie’, September 2003, available at <http://www.vzbv.de/mediapics/stellungnahme_des_vzbv.pdf>, at 5.

40See the resolution (n. 7 above), Amendment 64.

41See the explanation of the amended proposal (n. 9 above), at 4.3.6. See also M. HOFFMANN, BKR 2004, p 308 at 311. Of course, the new Consumer Credit Directive could amend Directive 85/577/EEC, as Article 15 of the amended proposal amends Directive 93/13/EEC on unfair contract terms.

42See A. DANCO, WM 2003, pp 853 et seq.

43See M. ROHE, BKR 2003, pp 267 et seq.; K. RIESENHUBER, ZBB 2003, p 325 at 330 et seq.; J.-U. FRANCK, ZBB 2003, p 334 at 342.

44For a detailed discussion see P. ROTT, ‘Mitverantwortung des Kreditgebers bei der Kreditaufnahme – Warum eigentlich nicht?’, BKR 2003, pp 851 et seq.

45This has been criticised by U. REIFNER, VuR 2004, p 85 at 88, since the consumer may be at risk of being held liable for false or incomplete information.

46See K. RIESENHUBER, ZBB 2003, p 325 at 327.

47See P. ROTT, BKR 2003, p 851.

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would be even more effective than the creditor’s obligation to inform the guarantor about the creditworthiness of the borrower that was discussed in the past.48

Whether the duty of responsible lending is a procedural requirement or whether it goes further than that is unclear. The amended proposal does not specify by any means the consequences creditors have to draw if they discover that the consumer is not creditworthy.49 Much will depend on how the duty to responsible lending is applied by the courts, and eventually interpreted by the ECJ, and much will depend on the sanctions Member States place on irresponsible lending. With respect to sanctions, the Directive leaves the Member States a wide margin of discretion although it seems obvious that individuals must have the right to sue for breach of the obligation to responsible lending.50 Otherwise, the Directive’s goal of preventing overindebtedness cannot be achieved.51

The provision of Article 6 is meant to protect ‘the consumer’ in general and therefore it includes the consumer guarantor.52 Thus, a guarantee contract can also be concluded only if the guarantor himself has sufficient property and/or income to repay the credit or that part of the credit he or she guarantees for. This must be judged in isolation from the creditworthiness of the principal debtor. Since the guarantee is only subsidiary to the principal debt, both may not be added.53

This rule would grant the guarantor much better protection than he currently enjoys under German law. It might cover almost all the cases in which German courts have applied the immorality clause of § 138 paragraph 1 of the Civil Code in order to protect individuals that have guaranteed the repayment of consumer credit contracts by close relatives.54 Typically, in these cases payment of the debtor’s debts by the guarantor was absolutely impossible,55 and therefore the creditors would have acted

48See A. SÖLTER (n. 1 above), pp 173-174.

49See also M. HOFFMANN, BKR 2004, p 308 at 312.

50See K. RIESENHUBER, ZBB 2003, p 325 at 330.

51For a discussion on Swiss law on responsible lending and a proposal, see P. ROTT, BKR 2003, p 851 at 857-858.

52See also the first proposal (n. 6 above), at 17.

53This rule has also been recognised by the German Bundesgerichtshof in the context of the notorious guarantees by close relatives, see BGH 27.1.2000, NJW 2000, p 1182.

54See also M. ROHE, BKR 2003, p 267 at 272. For an overview of the vast case-law see H. SCHIMANSKY, ‘Aktuelle Rechtsprechung des BGH zur krassen finanziellen Überforderung von Mithaftenden bei der Kreditgewährung’, WM 2002, pp 2437 et seq.; S. BRAUN, ‘Von den Nahbereichspersonen bis zu den Arbeitnehmern als Bürgen: ein Überblick über die Rechtsprechung des BGH zur Sittenwidrigkeit von Bürgschaften’, JURA (Juristische Ausbildung) 2004, pp 474 et seq.; A. KRAFKA, ‘Die Rechtsprechung des BGH im Bürgschaftsrecht’,

JA (Juristische Arbeitsblätter) 2004, p 668 at 669 et seq.

55A gross imbalance between the guaranteed amount and the income and property is the main prerequisite for the immorality verdict under § 138 par. 1 of the Civil Code, see, for example, BGH 26.4.2001, NJW 2001, p 2466.

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irresponsibly in the terms of Article 6 of the amended proposal. Again, the effectiveness of this provision would essentially depend on the sanctions.

3.1.3Contractual Information

Information has traditionally been the main instrument in EC consumer law, and information duties also form part of the current Consumer Credit Directive 87/102/EEC. One of the central elements of the Commission’s proposal is to make consumer information more comprehensive, and information also lies at the centre of the protection granted to guarantors.56 In principle, this is a laudable approach that would certainly improve German law on the protection of guarantors at the pre-contractual stage.57

Under Article 10, the guarantor is entitled to a copy of both the consumer credit contract and the guarantee contract.58 The guarantee contract has to provide information on the maximum amount guaranteed and the charges for defaulting to be applied in accordance with the procedure referred to in Article 10(2) lit. h) of the amended proposal.

What is entirely unclear is at which point of time the creditor has to provide the contractual information. The first proposal distinguished information in advance, Article 6, from contractual information, Article 10. Thus, one might assume that the contractual information must not necessarily be given in advance. Obviously, information on the maximum amount guaranteed must form part of the guarantee agreement. However, it is also essential that the guarantor receives his copy of the credit agreement before he is bound by the guarantee contract.59 At least, the period of withdrawal may not begin before the guarantor receives his copy of the credit agreement.60

Although it has been doubted that the same pre-contractual set of information will prove useful to the guarantor,61 some of the information that has to be provided to the borrower is clearly of immediate interest to the guarantor, too. This is namely: the amount, number and frequency of payments to be made, the borrowing rate, the credit costs, the payment schedule and other securities because these elements of the contract immediately determine the guarantor’s potential obligation.62 In particular,

56See the explanation on Article 1 of the proposal (n. 6 above).

57See also H.-W. MICKLITZ & P. ROTT, JKR 1997, p 131 at 170-171; S. SCHWARZ (n. 5 above), pp 171 et seq.

58This right is, for example, enshrined in sec. 105 (5) of the UK Consumer Credit Act 1974.

59This is established, for example, in Article L. 311-8 of the French Code de la Consommation; see I. HAUSCHILD (n. 22 above), pp 52 et seq.; A. SÖLTER (n. 1 above), p 33.

60See infra, at 3.

61See BGH 21.4.1998, NJW 1998, p 1939; O. KLEIN, ‘Zur Anwendbarkeit des Verbraucherkreditgesetzes auf Bürgschaften’, DZWir (Deutsche Zeitschrift für Wirtschaftsrecht) 1996, p 358 at 359-360; A. SÖLTER (n. 1 above), pp 141 et seq. For a more positive view, see F. PUTZO (n. 25 above), pp 76-77; S. SCHWARZ (n. 5 above), pp 124 et seq.

62See also P. ULMER, ‘Anmerkung’, JZ (Juristen-Zeitung) 2000, p 780 at 782; W. ZÖLLNER, ‘Die Bürgschaft des Nichtunternehmers’, WM 2000, p 1 at 4.

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if the guarantor knows the borrower and his financial situation well, these pieces of information may enable him to get a better idea of the risks involved.63 And if the credit contract has not yet been concluded, the guarantor may even exercise independent control of the conditions of the contract.64

3.1.4Formal Requirements

Under Article 10(1) of the proposal, contracts can be concluded in writing or on another durable medium. Although this is in line with recent EC consumer legislation that wishes to foster the conclusion of contracts by electronic means,65 it merely regards the storage of the contract and disregards the warning function that is connected to the written form.66 Guarantees contracts are particularly risky, and this was expressly recognised by Article 9(2) lit. c) of the E-Commerce Directive 2000/31/EC that exempts consumer guarantees from the general requirement to enable contracts to be concluded in electronic form. Article 10(1) therefore constitutes a loss of protection in countries such as Germany and the United Kingdom67 that currently ensure that contracts on guarantees cannot be concluded in electronic form because they are particularly dangerous to the consumer, even if an electronic signature is used.68

3.1.5No Specific Warning Concerning the Risk of a Guarantee

Unlike German law,69 a number of EC Member States require the creditor to give the guarantor a specific warning concerning the risk of a guarantee.70 No such provision can be found in the Commission’s first or amended proposal.

63See also S. SCHWARZ (n. 5 above), p 124.

64See F. PUTZO (n. 25 above), p 78.

65See, in particular, Article 5 of Directive 1999/93/EC on electronic signatures, O.J. 1999 L 13/12, and Article 9 of Directive 2000/31/EC on electronic commerce, O.J. 2000 L 178/1.

66See, for example, the comments by the GERMAN MINISTRY OF JUSTICE (n. 29 above); U. REIFNER, VuR 2004, p 11 at 13. Even the written form has been criticised as not providing sufficient protection, see D. MEDICUS, ‘Leistungsfähigkeit und Rechtsgeschäft’, ZIP 1989, p 817 at 820; B. GROSSFELD & S. LÜHN, ‘Die Bürgschaft junger Bürgen für ihre Eltern’, WM 1991, p 2013 at 2018; J. GERNHUBER, ‘Ruinöse Bürgschaften als Folge familiärer Verbundenheit’, JZ 1995, p 1086 at 1090; S. SCHWARZ (n. 5 above), pp 176-177.

67Article 105 of the Consumer Credit Act 1974.

68See P. ROTT, ‘Die Auswirkungen des Signaturgesetzes auf die rechtliche Behandlung von elektronischem Datenmanagement und Datenaustausch – eine Prognose’, NJW-CoR (Neue Juristische Wochenschrift – Computerreport) 1998, p 420 at 427-428, with further references.

69See, for example, BGH 18.1.1996, NJW 1996, p 1274; H.-W. MICKLITZ & P. ROTT, JKR 1997, p 131 at 155-156; N. HORN, ZIP 2001, p 93 at 102.

70See for the United Kingdom reg. 3 with Annex III of the Consumer Credit (Guarantees and Indemnities) Regulations 1983, S.I. 1973 No. 1556; F. PUTZO (n. 25 above), p 60. For France, see Article L 313-7, 313-8 of the Code de la consommation; I. HAUSCHILD (n. 22 above), pp 7475; A. SÖLTER (n. 1 above), p 34.

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