Towards a true European Market for retail financial services

In December 2015 the Commission commenced a comprehensive consultation on steps to take to create a 'true European market for retail financial services'. Stakeholders, including consumers are invited give their views on the ways to improve choice, transparency and competition in retail financial products and services, and ways to facilitate the cross-border provision of these products and services. The consultation is focused around insurance, mortgage, loans, payments and bank accounts.

The consultation seeks to engage stakeholders in various ways. Consumers can record and share their experiences, and consumers and interested stakeholders had already a chance to participate in a live chat with the Commission (see our earlier post here). Besides these, stakeholders can also submit their written responses to the questions outlined in the Green Paper on retail financial services.

In line with the general framework of the consultation, the Green Paper seeks our input on how to improve cross-border access to financial services, and thereby improve competition in retail financial services sector and improve consumer choice in products and services. The Commission aims to identify the specific barriers that consumers and firms face in using the internal market, and identify the ways to overcome those barriers, including the best use of digital technology.

Responses can be submitted by 18 March 2016.

Transparency of energy offers

Yesterday we reported about the Commission's study on vulnerability, which, among other things, called for more transparency, so that consumers could easier compare offers and make choices. This week also the BEUC reported on the need for more transparency in one consumer sector - energy.

 

BEUC, EUROGAS and EURELECTRIC issued a joint statement urging energy suppliers to simplify their offers to consumers and defining further the general legal requirement for provision of information in a "clear and comprehensible manner". The recommendation is to focus on key information (product name and main feature; total price and conditions for price changes; contract duration, notice period and conditions for terminations, incl fees and penalties; payment frequency and method options; supplier's contact details) and to deliver it "in a short, easily understandable, prominent and accessible manner". This is interesting, since we can infer that, at least in the eyes of these organisations, clear and comprehensible means concise, free of jargon and provided in one easily accessible place (instead various parts of this disclosure finding themselves in various documents of the supplier) (see BEUC's news report).

Of course, the key information provided to consumers in the above-mentioned way would not replace pre-contractual information duties of the energy providers. Whether the energy sector follows on these recommendations will be evaluated in early 2017.

Consumer vulnerability study published by the Commission

Yesterday the Commission published a study examining the incidence of consumer vulnerability across the EU28 and Iceland and Norway. It identifies the main reasons behind this vulnerability and what can be done about it. A special focus is on the challenges consumers face in the online environment, as well as in the finance and energy sectors. Many consumers show some signs of vulnerability, putting them at a higher risk of suffering negative outcomes in the market and making them more susceptible to certain marketing practices.

The key finding is that the incidence of vulnerability is the highest when consumers face complex advertising or when they have problems comparing deals because of market-related or personal factors, giving them difficulties getting informed, comparing, accessing and choosing between offers. Presenting offers in a simpler and clearer way significantly improves consumers' ability to select the best deals and to exercise their right to choose other alternatives.

If you are interested, take a look at the Commission's factsheet and final report here. 

A missed opportunity? CJEU judgment in Case C-49/14 (Finanmadrid)

Today the Court of Justice of the European Union delivered its judgment in Case C-49/14 (Finanmadrid). We have reported earlier on AG Szpunar’s opinion in this case. The questions referred for a preliminary ruling gave the CJEU an opportunity to clarify the relation between the general principles of effectiveness and equivalence in EU law and Article 47 of the EU Charter of Fundamental Rights, which safeguards the right to effective judicial protection.

The Court’s judgment

The Court has not seized this opportunity. Instead, it deals with the case entirely and exclusively in the framework of the effectiveness of Directive 93/13/EEC (Unfair Contract Terms), without any reference to Article 47 of the Charter. The Court merely concludes that the referring court “has not stated the reasons which have led it to doubt the compatibility” with Article 47 of the national legislation at issue and that, for lack of “information which is sufficiently precise and complete”, it is not able to give “a useful reply” (para. 57). The Court does not clarify why it is “not necessary” to answer the questions concerning Article 47, nor does it state what (additional) information would be needed exactly. At the same time, the Court does examine the case in detail in the light of the principle of effectiveness. It seems that the Court’s consideration that the questions by the referring court must be understood broadly (para. 31) applies only to the questions concerning Directive 93/13.

What was this case about? The referring court was confronted with an application for the execution of an order for payment obtained by Finanmadrid against the defendants in enforcement proceedings, which had only involved a Secretario judicial (court registrar), not a judge. Spanish procedural law provides for intervention by a court only where the amount claimed is apparently not correct or where the debtor contests the proceedings. The referring court was precluded from an examination of the potentially unfair nature of the terms of the contract which gave rise to the enforcement proceedings, because the Secretario judicial’s decision (the order for payment) is an enforceable instrument with the force of res judicata.

The Court’s conclusion that such a procedural arrangement is liable to undermine the effectiveness of the protection intended by Directive 93/13 is, perhaps, not very surprising. The Court refers, among other things, to its judgments in Banco Español de Crédito and Sánchez Morcillo (reported by us here and here) to conclude that effective protection under Directive 93/13 can only be guaranteed if the national procedural system allows the court, either during the order for payment proceedings or before granting leave for execution, to check of its own motion whether the terms of the contract at issue are unfair. The involvement of a Secretario judicial is insufficient, because they can only check formalities; it does not fall within their powers to assess the potentially unfair nature of a term in a contract on which the debt is based (para. 50). There is also a significant risk that the consumers concerned will not lodge any objection (para. 52). In these circumstances, the Spanish rules on res judicata appear to run counter to the principle of effectiveness.

A missed opportunity?

While the Court performs an extensive analysis of the Spanish procedural rules at issue, it makes no reference to Article 47 of the Charter.

Article 47 of the Charter safeguards the (fundamental) right to an effective remedy and a fair trial before a court of law for the violation of rights within the scope of EU law. In a speech at a conference on the Charter (Brussels, 17-18 December 2014; click here), Mr. A. Rubio González, Agent for the Spanish Government before the CJEU, pointed out the growing importance of the Charter and Article 47 in particular for Spanish legal practice and effective consumer protection. In this respect, he specifically mentioned Finanmadrid as a pending case, and he observed that AG Jääskinen believes that the principles of effectiveness and equivalence should be brought under the umbrella of Article 47 of the Charter (opinion in Case C-562/12, para. 47).

However, in Finanmadrid, the relation between the principle of effectiveness and Article 47 seems to be overlooked by the Court. In his opinion, AG Szpunar remarks that it is as yet unclear whether Article 47 offers additional protection, or whether it replaces the principle of effectiveness. Other judgments (e.g. Sánchez Morcillo, paras. 35 and 50) suggest that the effectiveness of consumer protection intended by Directive 93/13 should be read in conjunction with Article 47 of the Charter. It is unclear why AG Szpunar disconnects Article 47 and the principle of effectiveness, but his opinion may have given the Court an argument to avoid answering the questions concerning Article 47 altogether.

The judgment is therefore inconclusive as regards Article 47 of the Charter. There are more (Spanish) cases pending before the CJEU referring to this Article in the context of Directive 93/13 (see, e.g., here and here). What role Article 47 has to play in this context remains yet to be seen.

ODR-Platform online

The Online Dispute Resolution (ODR) platform is now available online.

The platform serves as a single contact point to direct consumers and traders to available dispute resolution bodies for consumer disputes in all EU countries. The availability of such bodies is a must following the implementation of the ADR Directive. Given that some countries are delayed with a view to the implementation of the Directive, the platform currently only provides information on some of the Member States.

The platform only covers disputes arising out of online sales.

Have a look!

Conference and publication on consumer ADR and ODR

The Centre for Socio-Legal Studies of the University of Oxford will hold the Fourth Annual Civil Justice Conference on ADR and ODR on 18-20 April 2016. The conference programme is organized around three themes: implementation (of the ADR Directive); trust (in ombudsman); justice (the potential of consumer ADR to deliver justice). The full provisional programme is available here, and the link to registration here.

Our readers interested in this area of EU consumer law may wish to know that a special issue of the European Review of Private Law (vol. 24 issue 1) on Access to Justice and Consumer ADR is soon to be published.

AG Szpunar's opinion in case C-421/14 (Banco Primus)

Enforcement proceedings and unfairness continued: AG Szpunar in Case C-421/14 (Banco Primus)

In yet another case following a preliminary reference from a Spanish court, Advocate-General Szpunar has delivered an opinion about the implications of Directive 93/13 for the ex officio assessment of unfair contract terms. The most important feature of this case is the fact that an ex officio assessment had already taken place at an earlier stage. The referring court has asked whether this limits its obligation to assess other potentially unfair terms which have not been part of the initial assessment. This case is of interest both from a procedural and a substantive perspective.

The consumer, Mr. Jesús Gutiérrez García, had started extraordinary opposition proceedings (incidente extraordinario de oposición) against Banco Primus SA in a final attempt to stop the mortgage enforcement proceedings initiated against him. These proceedings were “extraordinary” in that the normal opposition period of 10 days had lapsed, and even the expiry period of 1 month (on the basis of transitional law after the introduction of Ley 1/2013 in Spain, on which the Aziz judgment had a determining effect). In previous proceedings, the contractual default interest had already been assessed and diminished to zero, and the stay of the enforcement proceedings (predating Ley 1/2013) had been terminated. In the subsequent extraordinary opposition proceedings, the referring court noted that several other clauses in the mortgage agreement could be considered as unfair, but it was prevented from assessing these clauses because the proceedings were brought too late under the applicable transitional law.

The referring court asked various questions concerning the scope of the obligation to assess the unfairness of contract terms of its own motion, touching on the interpretation of Articles 3, 4, 6 and 7 of Directive 93/13 and the principles of equivalence and effectiveness (interestingly, there is no reference to Article 47 of the EU Charter of Fundamental Rights). In his opinion (paras. 28 ff.), AG Szpunar first comments that the Spanish government’s and Banco Primus’ arguments that Mr. Gutiérrez García’s claim is inadmissible do not preclude the admissibility of the request for a preliminary reference. Spzunar then refers to the BBVA case to conclude that the expiry period of 1 month is unlawful. He moves on to explain his view that the mere fact that an ex officio assessment has been carried out previously does not limit the referring court’s obligation to assess the unfairness of contract terms that have not been assessed yet. Szpunar does not address the (hypothetical) question what should happen if the terms at issue have already been assessed and the previous decision has acquired res judicata force.  

In the second part of his opinion (paras. 52 ff.), AG Szpunar gives an overview of the EU case law on the assessment of the unfairness of contract terms. Spanish law allows for early termination / acceleration of the mortgage agreement insofar as a serious breach on the part of the consumer is foreseeable. According to Szpunar, this is not contrary to Directive 93/13 as such, as long as the national court’s assessment of the unfairness of a contractual clause providing for early termination is not anticipated, and as long as the national court can still declare the clause at issue to be not binding on the consumer. However, in the present case, the mortgage agreement offered Banco Primus the option of early termination in the event of a minor default on the part of Mr. Gutiérrez García. Although the bank did observe the national procedural requirements in practice, Szpunar puts forward that the court's assessment should not depend on whether an unfair term is actually applied or not. The clause may be unfair even if the bank acts within the limits indicated by the law, but the clause would open the possibility for going beyond that.

New safe harbour agreement reached

A quick update for our readers on the legal guarantees surrounding data flow between EU and US: today, the Commission and the American government have reached an agreement that will replace the "safe harbour" agreement struck down by the CJEU last October (see our post here). The new agreement has been labelled "EU-US privacy shield". 

The deal is supposed to represent a major improvement compared to its predecessor, which, according to the Court of Justice, did not offer sufficient guarantees that the private data of European citizens would be processed in an acceptable ways once transferred to US-based companies and agencies.

According to the Commission's releases, the "privacy shield" should provide both clear rules for companies handling data and limitations on the US government's access to such data. Further, European citizens fearing that their data is being mishandled should have several remedies available.

Also this time, take a look at the Guardian's nice article on the topic for some more context.