Court of Justice of the European Union rules on consumer credit interest charges

On April 23, 2026, the Court of Justice of the European Union (CJEU) issued a ruling regarding interest calculations on consumer credit contracts. The case originated in Poland, where a borrower challenged a bank's practice of charging interest on loan amounts intended for optional credit insurance premiums. The Court determined that banks cannot charge interest on funds that are not actually paid to the borrower but are instead used for credit-related costs. It emphasized that 'total amount of credit' and 'total cost of credit' are distinct legal concepts. However, the ruling allows lenders to pass these costs to the consumer by incorporating them into a higher interest rate, provided that transparency requirements are met. This decision clarifies that interest may only be applied to the actual principal received by the borrower. The ruling is expected to influence banking practices across the European Union to enhance consumer protection and calculation transparency.