Monday, 24 July 2017

Debt collection requires consumer protection, too - CJEU in Gelvora (C-357/16)

From previous European case law we already know that commercial practices directed at consumers have been broadly interpreted by the Court of Justice (see e.g. CHS Tour Services). In the most recent case - Gelvora (C-357/16) - which was decided last Thursday, July 20, the CJEU decided to encompass within this notion also services of debt collection agencies, which collect debts resulting from consumer credit agreements.

Gelvora is a private debt collection agency operating in Lithuania, which contracted with banks not consumers, to take over banks' claims from consumer credit contracts. Upon being assigned the debt, Gelvora would start recovery actions, sometimes in parallel with enforcement procedures following judicial decisions. Consumer debtors filed a complaint about unfair commercial practices of Gelvora with the Lithuanian consumer protection authority (Valstybinė vartotojų teisių apsaugos tarnyba). The CJEU was asked as to whether the UCPD could apply at all to such practices.

The CJEU reminds that to qualify certain commercial actions or omissions as a commercial practice, there is no need for a contractual relationship (para 20). The practice needs to be 'directly connected with the sale of a product', which covers also actions undertaken to obtain a payment for the product (para 21). In the given case, banks provide consumers with credit (a service) in exchange for consumers' repayment (together with interest) (para 22). Subsequently, Gelvora provides debt recovery activities  - which should be seen as a 'product' provided by debt collection agencies under Art. 2(c) Unfair Commercial Practices Directive (para 23). At the same time, these activities could be perceived as a commercial practice, as the activities of debt collection agencies may influence consumers' decision as to the payment of the product (para 25). It is irrelevant that the bank provided the original service (credit), as the debt collection activities form a part of after-sales commercial practices, that may be facilitated by third parties (para 26). The CJEU clearly emphasises also the danger of excluding such practices from the scope of application of the UCPD - as it could then be tempting for service providers to separate the recovery of payment phase from the provision of the service, avoiding the application of consumer protection (para 28).

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