Evidence of disclosure in consumer credit cases - AG Wahl's opinion in Case C-449/13 CA Consumer Finance v Bakkaus and Bonato

Contracts for consumer credit continue to raise questions under EU law, especially in regard to the mandatory disclosure duties that form the subject of the book that was mentioned in the previous post. On September 11th, Advocate General Wahl gave his opinion in a French case that is currently pending at the CJEU, CA Consumer Finance v Bakkaus and Bonato (opinion not yet available in English).

The case concerns the interpretation of the European Directive 2008/48/EC on credit agreements for consumers, in particular as regards pre-contractual information duties of professional credit providers towards consumers. Both Ms Bakkaus and Mr and Mrs Bonato had concluded contracts for car loans with CA Consumer Finance. In a dispute regarding the repayment of these loans, the tribunal d'instance in Orléans of its own motion (the consumers had not appeared in court) raised several preliminary questions concerning the rules of evidence applying under the European Directive. These questions concern the credit provider's duties under the Directive to (i) provide consumers with certain information and an explanation, in order for them to make a well-advised choice before entering into a credit agreement, and (ii) to assess the consumer's creditworthiness, with an eye on both parties' responsibilities when they decide to conclude the contract. According to French law, a credit provider faces severe consequences in case of non-compliance with these duties, including a loss of the possibility to recover interest on repayments of the loan. 

The referring judge in Orléans wishes to obtain more clarity as to (a) who bears the burden of proof of (non-)fulfillment of the credit provider's information duties and (b) in which form evidence has to be produced. AG Wahl submits that the answer to the first question implicitly follows from the Directive, whereas the answer to the second question depends on national laws, in accordance with the principle of procedural autonomy of Member States.

According to AG Wahl, the effective exercise of the rights deriving from the Directive does not preclude a national provision, such as the French rule applicable in this case, that requires the credit provider to prove that he has correctly fulfilled his information duties. On the contrary, in line with the Directive's objectives of consumer protection, it may be assumed that the burden of proof rests on the professional credit provider. In case a national judge lacks sufficient information to assess whether the relevant information duties have been fulfilled, the judge should ask the credit company to provide additional data.

The AG is of the opinion that the credit provider may not shift the burden of proof to the consumer by simply including a standard term in the contract according to which the consumer declares to have received the relevant information. The Directive does not preclude credit providers from using such standard terms, as they may support the proof of fulfillment of information duties, but additional evidence may be required in the specific case.

As regards the consumer's creditworthiness, the AG considers that Article 8 of the Directive obliges the credit provider to assess this on the basis of sufficient information. In this context, the credit provider may not limit the assessment to simple declarations by the consumer that have not been checked. Article 8 does, however, in the AG's opinion not require the credit provider to systematically check information  given by the consumer in order to establish its truthfulness.

Finally, AG Wahl submits that Article 5(6) of the Directive should be interpreted in the sense that, on the one hand, the credit provider should not assess the consumer's financial situation and needs before having given an explanation of the pre-contractual information, whereas, on the other hand, an appropriate explanation cannot be considered to follow from contractual information included in the credit agreement. The credit provider can, however, not be required to provide an explanation in a written document.

Even more than you wanted to know

New additions have been added to the virtual symposium on Ben-Shahar's and Schneider's book on mandatory disclosure. They include contributions by:

VII. Nancy Kim

VIII. Florencia Marotta-Wurgler

IX. Daniel Schwarcz

X. Jeff Sovern

XI.A David Vladeck

Online 'free' newspapers also subject to national libel and defamation rules - CJEU in Papasavvas and Others (C-291/13)

11 September 2014: CJEU judgment in case Papasavvas and Others (C-291/13)

Over a week ago the CJEU issued an important judgment in this case concerning interpretation of the e-Commerce Directive (2000/31/EC). While e-Commerce Directive is not per se a consumer protection measure, its provisions regulating the legal aspects of electronic commerce have a significant impact on European consumers, as well.

In this case from Cyprus Mr Papasavvas claimed damages against a newspaper company for what he considered to be defamation through articles published in the daily newspaper, which were published online on two websites. One of the questions raised was whether the e-Commerce Directive should apply at all in this case, since the websites of the newspaper were free for Mr Papasavvas to access and peruse and they only generated income from the advertisements placed on them. The question was whether the Directive should only apply to such 'information society services' that have been provided against a remuneration from the recipient? The positive answer to this question would significantly lower the level of protection granted online to internet users since many websites nowadays earn their money through advertisements rather than through financial contributors of their readers. The CJEU confirms that the 'service' does not need to be paid by the person for whom it is performed (Par. 28-30) to fall under the scope of the e-Commerce Directive, even if the definition refers to a service 'normally provided for remuneration' (Par. 27). It is sufficient that this remuneration is being paid by someone else than the recipient.

This broader scope of application could allow the online newspaper to rely on Articles 12 and 14 of the Directive in order to escape liability for the posted content (incl. defamation) if it could prove that it was 'merely' a 'conduit'. In this case the online newspaper could not be qualified as such. For these articles to apply the service provider would have to have no knowledge or control over the information that was transmitted or stored, which was not the case here. (Par. 40) (this and following articles refer also to the Google France case)

The e-Commerce Directive allows for the Member States to keep on applying their rules on civil liability (incl. for defamation) to information society service providers, as long as this does not restrict the freedom to provide them from another MS. (Par. 33-34) Since in the given case the services originated in Cyprus, the rules on civil liability for defamation could be applicable.

However, if the Cyprus did not implement the provisions of the Directive in time its provisions may not be directly invoked by the parties. The Directive does not have a direct horizontal effect, which means that the national service providers could only rely on the national provisions implementing it and not on the rights granted to them by the Directive itself. Failing the timely interpretation, the national court is obliged to the consistent interpretation of the national law with the EU law. (Par. 54-56)

More than you wanted to know - a virtual symposium

On ContractsProf Blog, a virtual symposium is currently taking place on the book 'More than you wanted to know' by Omri Ben-Shahar and Carl E. Schneider. 

The book, of which we posted a summary earlier, addresses the problem of lacking effectiveness and potential harmfulness of mandatory disclosure rules in consumer contract law. 

Contributions to the virtual debate so far include an introduction of the authors and blog posts by:

I. Aditi Bagchi

II. Steven Burton

III. Ryan Calo

IV. Robert Hillman

V. Ethan Leib

VI. Lauren Willis

New IACL website

The International Association of Consumer Law has a new website - http://www.iacl.net.au/. Even though the old one is still functional it has stopped being updated some time ago so I refer everyone to the new one.

Checked-in baggage at additional prices - CJEU in Vueling Airlines (C-487/12)

18 September 2014: CJEU's judgment in the case Vueling Airlines (C-487/12)

The CJEU agreed today with the suggestion given by the AG Bot (see our earlier post: Airlines may freely determine checked-in luggage costs) to leave it to the market to determine whether the cost of the checked-in baggage would be included in the air transport service charge or whether it would be charged separately by the airlines, as an optional supplement. Therefore, the provision of the Spanish law that prohibits air carriers from charging for checking in passengers' baggage in the form of an optional price supplement is not in compliance with the European consumer law. The CJEU reached this conclusion upon determining that the purpose of the Regulation No 1008/2008 is to ensure information and transparency with regard to prices for air services. (Par. 32) Even if the Regulation does not specifically mention prices to be paid for carrying baggage, it has to apply to them, as well, so that it was possible to effectively compare prices for air services. (Par. 33) The Regulation distinguishes between two different charges and sets different rules for them depending on whether the price to be paid constitutes an unavoidable and foreseeable item included in the price of the air service or whether it is an optional price supplement in respect of a complementary service. (Par. 37) The CJEU mentions that the most recent business models of airlines demand that a different price could be set for an air ticket, depending on whether the passenger wants to travel with just his carry-on or check-in baggage. Many consumers would prefer to travel light if that saves them some money on their travel expenses. It is not longer feasible, therefore, to expect from the airlines to accept all check-in baggage without incurring supplementary charges. (Par. 38) This means that the price to be paid for the carriage of air passenger's checked-in baggage constitutes an optional price supplement (Par. 39) contrary to the hand baggage (Par. 40).

The CJEU ascertains, however, in its judgment that such an optional price supplement would need to remain optional - that is it should only apply to the air transport service on an opt-in basis, the choice whether to opt-in should be given to consumers at the beginning of the booking process before they become invested in the particular service, and it should be drafted in a transparent, unambiguous way so that consumers are clearly informed about this financial burden. (Par. 46 read together with the opinion of AG Bot)

News from EU consumer law in the UK: UKSC in Robertson v Swift

Although this blog usually deals with developments at the European level, sometimes it can be interesting to take a look at national practices affecting the implementation of European consumer law. 

In particular, this week the UK Supreme Court (hence, UKSC) released a judgement which signals the Court's intention to "take EU consumer law seriously" when it is called to fill in the gaps left by UK implementing legislation. 

In the case under discussion, Robertson (Appellant) v Swift (Respondent) [2014] UKSC 50, concerning a contract for the transportation of goods concluded between Dr Robinson, a private party seeking to move his furniture to his new home and Mr Swift, a professional mover, two questions had to be decided:

- first, whether the contract fell under the Cancellation of Contracts made in a Consumer’s Home Regulations 2008, entitling the consumer to a right of cancellation and to receiving the related notice;

- second, whether, lacking this notice, the consumer should still be entitled to cancellation within the term provided by the applicable legislation (7 days).

Previous instances had been dealing with the first question, concluding that, in light of Directive 85/577/EEC, that the Regulations sought to implement, the rules on doorstep sales should be applicable to the case- even though the negotiations had been initiated by the consumer and there had been more than one visit to his home, a circumstance that might have given Dr Robertson a better chance to consider whether he really wanted to take the offer. 

More interesting, however, is the second question. UK legislation had failed to provide a sanction for the violation of the duty to inform the consumer of his right to cancel a doorstep contract within a given time. In this context, the Court of Appeals had considered that the cancellation right could not be validly exercised. The UKSC, on the other hand, observed that it felt bound to interpret the national legislation in light of the original European directive; in this sense

"the court must not only keep faith with the wording of the Directive but must have closely in mind its purpose. Since the overall purpose of the Directive is to enhance consumer protection, that overarching principle must guide interpretation of the relevant national legislation. [para 22]"

In this regard, 

"The centrality of the right to cancel a contract as a feature of the protection which the Directive is designed to afford to the consumer was emphasised by CJEU [para 23] [...] 

The requirement to give notice of the right to cancel should not therefore be seen as a technical prerequisite to the arousal of the right but as a means of ensuring that the consumer is made aware that he is entitled to cancel the contract after a period of reflection. [para 24]"

As a consequence, 

"if the right to cancel could be effectively nullified by a failure (or refusal) of a trader to give written notice of the right to the consumer, this would create a considerable gap in the level of protection that the Directive sought to provide. [para 25]"

Interestingly, the UKSC observes that in this case the customer was well-educated, skilled and capable of negotiating and looking after his interests, but is "is clearly the intention of both the Directive and the regulations that those less well equipped than Dr Robertson should have what is considered to be the necessary protection. [para 26]"

Finally, the result thus reached by the Court is also consistent with what had been stated by the CJEU in Heininger (C-481/99). By adopting a "purposive construction" of the 2008 Regulations, the UKSC argues, it is possible to achieve such consistency. 

Unfair terms, mortgage enforcement and a consumer's fundamental right to accomodation - CJEU in Kušionová (C-34/13)

10 September 2014: CJEU judgment in Kušionová (C-34/13)

Today the CJEU handed down another important judgment in the field of mortgage enforcement (for previous case law have a look at Aziz and Sánchez Morcillo). This time it was not the Spanish, but the Slovak law of mortgage enforcement that was looked at by the CJEU. Contrary to the previous judgments, the national legislation was deemed to be in line with EU law.

In 2009, Mrs Kušionová took up 10.000 Euros. The loan was secured with the family home. The terms of Mrs Kušionová's bank (SMART Capital A.S.) contained a clause relating to extrajudicial enforcement of the charge on immovable property. This specific term stated that the creditor is able to enforce the charge without a court having the opportunity to review the clause. 

Under Slovak law, the sale by auction may be contested within 30 days of the notice of enforcement of the charge. After a public auction, the contesting person has a period of three months to take steps against the conditions under which the sale took place. According to Slovak civil procedure law, national courts may furthermore adopt any interim measure to prevent an auction from going ahead during an extrajudicial enforcement of a charge (like the one in the proceeding).      

The CJEU suggests that interim measures stopping the auction of a family home are adequate and effective means to prevent the continued use of unfair terms and are thus in line with the Unfair Terms Directive. Interim measures in general constitute an effective and dissuasive penalty for businesses infringing EU law. They are furthermore a proportional penalty if the national court deciding over the measures takes into account the fact that the property subject to the charge is immovable property forming the consumer's family home, the right to accomodation being a fundamental right guaranteed under the Charter of Fundamental Rights of the EU.

Although the Slovak legislation has already been changed (see nr 31 and 32 of the judgment), the CJEU's decision is interesting on a theoretical level as it  puts a strong emphasis on consumers' fundamental rights under EU law.

No delivery of EU order for payment = invalidity grounds - CJEU in joined cases eco cosmetics (C-119-121/13)

4 September 2014: CJEU judgment in joined cases eco cosmetics (C-119/13), Raiffeisenbank St Georgen (C-120/13) and Rechtsanwaltskanzlei CMS Hasche Sigle (C-121/13) 

 We have previously discussed the opinion of AG Bot in these cases on our blog (see You have been served!...). The three German cases concerned the possibility (or lack of) for a consumer to question the fact of the delivery of the order for payment after it has already been pronounced enforceable. The AG Bot argued that due to the specific character of the claims raised in this procedure of Regulation No 1896/2006 (pertaining non-contested monetary claims) and extraordinary form thereof (facilitating fast reimbursements), the defendant has to be given a real possibility of defence, which means ensuring he was properly and timely served with the order for payment. The CJEU agrees with the AG Bot that the balance between the defendant's right to defence and the claimant's interest in speedy and efficient procedure need to be observed. (Par. 37) If the defendant is not properly informed of the existence and basis of the EU order for payment issued against him, obviously he may not have all the necessary information to oppose it. (Par. 41) It has to, therefore, be established that if the defendant is not (or improperly) served the order for payment, the period for contesting the claim of Article 16 (2) never starts running, which means that even if the status of enforceability was given to the order, it may need to be invalidated. (Par. 43 and 48) Other remedies will need to be determined by national laws. (Par. 46-47) Practically speaking, if the order for payment is delivered to the defendant's address, the defendant does not contest it, so that it becomes enforceable pursuant to Article 18, the defendant may still refuse to pay and instead try to claim in front of the national court that the delivery of the order never took place. (Par. 49)

Financial Services and Jurisdiction: AG Szpunar in Kolassa (C-375/13)

3 September 2014: Opinion of AG Szpunar in Kolassa (C-375/13)

The Austrian resident Kolassa made claims against the British Barclays Bank based on prospectus liability (amongst others). He had acquired a bearer bond which lost all its value. The bonds had been issued by Barclays' German agency bank and were solely sold to institutional investors, not to private persons. The German DAB Bank AG bought some of these bonds and transmitted them to their Austrian subsidiary (direktanlage.at AG), who then sold it to the private investor Kolassa. Mr Kolassa himself was not the holder of the bond, but direktanlage.at, who held the bond in his own name and owed Mr Kolassa only a contractual obligation of delivery. The Austrian court dealing with the case had doubts about its jurisdiction and submitted several questions regarding the Brussels I Regulation to the CJEU.

As regards the application of Art 15 Brussels I Regulation, AG Szpunar suggested that Mr Kolassa himself is qualified as a consumer and that Barclays had directed its activities to the Member State of Mr Kolassa's domicile by having published the bond's prospectus in Austria. However, AG Szpunar answers in negative the question whether a contract was concluded between the parties of the dispute ('In matters relating to a contract...'). As a consequence, he deems Art 15 Brussels I Regulation not to be applicable.

The AG's reasoning why Art 5 Nr 1 lit a Brussels I Regulation is not applicable either is quite similar. He stresses the fact that, in the relation between Mr Kolassa and Barclays, there was no obligation freely assumed by one party towards another. The obligations Barclays had towards Mr Kolassa were thus not contractual in nature, but rather claims in tort, delict or quasi-delict within the meaning of Art 5(3) Brussels I Regulation. Prospectus liability clearly falls under Art 5(3) Brussels I Regulation. According to the AG, the harmful event occurred in the Member State of domicile of the 'holder' of a certificate, if the certificate's prospectus was published in this Member State and caused the holder's financial loss. Transferring this reasoning to the actual case, the Austrian court would have jurisdiction over the case. 

Finally, the Austrian court asked if, while determining its jurisdiction, national courts should only take into consideration the facts asserted by the applicant or whether they should rather conduct a comprehensive taking of evidence. On this topic, the AG suggested that national courts should evaluate the arguments of both sides, the applicant and the defendant, while not delaying the procedure with a comprehensive taking of evidence, which seems to be a reasonable solution.

Another preliminary procedure on financial services, this time in relation with the Brussels I Regulation. Let's see how the CJEU will decide!

CJEU in Germanwings (C-452/13): you have not arrived yet until you can actually get out of the plane

Imagine you are to travel on a flight scheduled to leave at 11:00 am and arrive at 1:00 pm. The flight is delayed, so you are wondering whether- under EU law, you might be entitled to compensation. Regulation  261/2004, as previously interpreted by the Court of Justice, establishes that compensation is due when the delay *at arrival* amounts to at least three hours.

The flight has touched ground at  3:58 pm, it has reached the terminal at 4:05 and the doors opened at 4:10. 

The answer to the question whether you can claim compensation depends on one basic issue: when has the plane actually "arrived"?

This was the question posed to the CJEU in Germanwings (C-452/13). Four possible answers were listed by the referring court:

(a)    the time that the aircraft lands on the runway (‘touchdown’);

(b)    the time that the aircraft reaches its parking position and the parking brakes are engaged or the chocks have been applied (‘in-block time’);

(c)    the time that the aircraft door is opened;

(d)    a time defined by the parties in the context of party autonomy.

The CJEU started with excluding the last option, absent any indication to this effect in the Regulation. Subsequently, it answered the question starting with the reason why compensation (as the Court had previously decided) is to be awarded in the first place, ie the fact that the travelers  have to endure an irreversible loss of time. Now, this loss of time is caused by the fact that, while on board of the airplane, the passengers' ability to communicate, move and attend to their normal activities is restricted. Such restriction is inevitable during the regular duration of a certain journey, but turns into damage when this duration is exceeded, originating a claim for compensation (see paras 19-21).

The restrictions that passengers have to endure, however, only come to an end when the latter are able to leave the aircraft- that is, when the doors open. For this reason, in the context of Regulation 261/2004 , whose sole aim is to grant "minimal rights" to passengers suffering various inconveniences when travelling (para 26), the notion of "arrival" has to be interpreted to mean the time that the aircraft door is opened- and the passengers are subsequently free to leave. 

In cases such as the one we started this post with, thus, having touched the ground a couple of minutes before the three hour "tolerance" period expires will no longer be an excuse for companies to deny passengers compensation   

The Data Brokers

Good video on dangers to consumers' privacy, on how data is gathered, trafficked and how we remain oblivious to it. See CBS' "60 Minutes - The Data Brokers" on YouTube or here.