In loans granted against the assignment of one-fifth of the salary or pension (“cessione del quinto”), the early repayment obliges the bank to reimburse in favour of the consumer the non-accrued part of all costs associated with the contract

On 22 December 2022, the Italian Constitutional Court delivered its judgment No. 263/2022, which ruled on the issue of the constitutionality of Article 11-octies, second paragraph, of Decree-Law No. 73 of 25 May 2021 (so-called “Sostegni bis”), as converted by Law No. 106 of 23 July 2021, according to which “Article 125-sexies of the Consolidated Law on Banking and Credit under Legislative Decree No 385 of 1 September 1993, as replaced by paragraph 1, lett. c) of this Article, shall apply to contracts entered into after the date of entry into force of the law converting this decree [i.e. 25 July 2021, ed.].The provisions of Article 125-sexies of the Consolidated Act of Legislative Decree No 385 of 1993 and the secondary rules contained in the Bank of Italy's Transparency and Supervisory Provisions in force at the date of the signing of the contracts shall continue to apply to the early repayments of contracts entered into before the date of entry into force of the law converting the present decree”. The Constitutional Court declared the constitutional illegitimacy of the mentioned second paragraph limited to the words “and the secondary rules contained in the Bank of Italy's Transparency and Supervisory Provisions”, for breach of Articles 11 and 117, first paragraph of the Italian Constitution.

The provision affected by the partial unconstitutionality replaced Article 125-sexies, Legislative Decree No. 385 of 1 September 1993 (“Testo unico delle leggi in materia bancaria e creditizia”, or “TUB”), relating to the pro-rata reimbursement of the costs paid by consumers in the event of early repayment of loans granted against the assignment of one-fifth of the salary or pension (“cessione del quinto”), with a new wording, aligning its discipline to the new and different interpretation provided by the European Court of Justice with the wellknown “Lexitor” judgment. The latter established that, in the event of early repayment by the consumer of the loan with cessione del quinto, the lender must reimburse the non-accrued portion of all the costs connected with the contract (so-called “up-front”and “recurring”). The second paragraph of the aforementioned Article 11- octies limited, however, the reimbursement, on a pro rata basis, of all costs only to financing agreements entered into after the effective date of Law No. 106/2021 (and therefore after 25 July 2021), on the basis of the interpretation provided by the Bank of Italy’s secondary rules to the original Article 125-sexies TUB.

The Constitutional Court held that this limitation violated European Union law and, in particular, Article 16, first paragraph of Directive 2008/48/EC, as interpreted by the Lexitor ruling, which has retroactive effect, since it is an interpretative decision. The Court therefore stated that consumers will be entitled to a proportional reduction of allcosts incurred in connection with the financing at the time of early repayment, even if the contract was entered into before the entry into force of Law No. 106/2021. In particular, the Court held that compliance with the commitments undertaken by the Italian State to the European Union pursuant to Article 11 and Article 117, paragraph 1, of the Italian Constitution prevails over the principle of the protection of the trust engendered in lenders by the undisputed interpretation of Article 125-sexies, Legislative Decree No. 385 of 1 September 1993, given by the Bank of Italy’s secondary rules prior to the Lexitor ruling.