District Court of Rotterdam rules in appeal of municipal pawnshops

The court has overturned two ACM decisions concerning pawn contracts
The District Court of Rotterdam has overturned the decisions of the Netherlands Authority for Consumers and Markets (ACM) that contained binding instructions on municipal pawnshops with regard to pawn contracts.

What was this case about?

ACM is the regulator that enforces compliance with new pawnshop regulations that came into force on July 1, 2014. In 2015, ACM imposed two binding instructions on the municipal pawnbroker in Amsterdam (Stadsbank van Lening) and the one in The Hague (Gemeentelijke Kredietbank). ACM disagreed with the way these two municipal pawnbrokers extended pawn loans if consumers were unable to repay these loans at the end of their pawn contracts. The two pawnbrokers demanded that customers pay interim interest payments. According to ACM, such demands would violate not only the regulations but also the spirit of the law. That is why ACM had imposed binding instructions. The municipal pawnbrokers decided to file appeals with the District Court of Rotterdam against these decisions.

How did the court rule on appeal?

The District Court of Rotterdam has allowed the pawnbrokers’ appeal, and has overturned ACM’s decisions. The court is of the opinion that ACM has interpreted the statutory standard incorrectly, and that the business practices of said municipal pawnbrokers are in accordance with the regulations. Another of the court’s considerations was that it had been stated in parliamentary history that the conditions of said municipal pawnbrokers would remain largely unaltered in the transition to the new scheme as of July 1, 2014.

Interim payments

The court rules that ACM failed to prove that demanding interim payments with loan extensions violates the law. According to the court, consumers are free to decide whether or not to take advantage of this option. Consumers are not forced to do so. They could also choose not to repay their pawn loans, and thus surrender their collateral as payment in full. Since consumers have a choice, there is no requirement that violates the regulations, the court argues.

What is next?

The court has ruled that ACM only incorrectly interpreted the statutory standards with regard to one aspect of the new pawnshop rules, which is demanding immediate repayment of the pawn loan when extending the contract. The court’s verdict does not apply to the other pawnshop rules such as the interest rate and the minimum loan term.

ACM will now carefully examine the court’s ruling. It still has the opportunity to file an appeal with the Dutch Trade and Industry Appeals Tribunal (CBb).

Read the decision of the District Court of Rotterdam

For the complete decision of the District Court of Rotterdam (in Dutch), please visit this website.