On 28 November 2018, the EU Court of Justice issued an order in PKO Bank Polski (C-632/17), which concerns the same issue as Profi Credit Polska (C-176/17), a case we have reported on earlier. In short, the question raised by the referring Polish court was whether the order-for-payment procedure at issue is incompatible with Article 7(1) of the Unfair Contract Terms Directive (93/13/EEC), because:
(i) the procedural rules restrict the consumer's right to lodge an objection against such an order for payment in such a way that there is a significant risk that she will not exercise that right, and
(ii) in the absence of the consumer, the court does not have the power to examine (a) the unfairness of the terms of the underlying credit agreement and (b) compliance with the requirements deriving from the Consumer Credit Directive (2008/48/EC).
Thus, there were two problems:
- The court's role is, in principle, limited to a review of formalities; it does not have available to it all the elements of fact and law arising from the credit agreement and thus, is not in the position to examine unfair terms.
- The legal relationship resulting from the credit agreement is reviewed only if the consumer lodges an objection; the objection must meet various procedural requirements in an extremely short period (two weeks); and the consumer-defendant must pay a court fee that is three times greater than the claimant; see also our blog on Profi Credit Polska.
In Profi Credit Polska, the CJEU already held that the Member States' obligation "to lay down procedural rules that ensure observance of the rights which individuals [i.e. consumers] derive from Directive 93/13", which "implies a requirement that there be a right to an effective remedy", also enshrined in Article 47 of the EU Charter of Fundamental Rights. The two above-mentioned problems combined prevented the court from carrying out the required assessment under the EU consumer protection legislation at issue. This is reiterated in PKO Bank Polski. The CJEU concludes that the Polish order-for-payment procedure is precluded by Article 7(1) of Directive 93/13 and Article 10 of Directive 2008/48/EC.
We can tentatively draw two conclusions from the CJEU's decisions:
- While the CJEU (still) does not make a clear distinction between Article 7(1) of Directive 93/13 (which requires "adequate and effective means" against unfair terms) and Article 47 of the Charter, it appears that the first presupposes the latter. If a case is not brought before the court, it cannot perform unfair terms control (either ex officio or at the consumer's request). In case of an "inversion of the dispute", i.e. it is the defendant – here: the consumer-debtor – who must initiate adversarial proceedings by lodging an objection, the court must determine whether the procedural rules infringe the consumer's right to an effective remedy (or rights of the defence, for that matter) as guaranteed by Article 47 of the Charter. If the obstacles are too high, there is a significant risk that consumers will not lodge and objection.
- The CJEU seems to suggest that the national court must be able to perform ex officio control, whether the consumer involved invokes the existence of unfair terms or not. This is in line with its earlier case law, see e.g. Banesto and Radlinger. But how does the referring Polish court obtain the necessary information? One possible answer is that the creditor must submit the underlying credit agreement in evidence. This calls into question the entire order-for-payment procedure, which is based on only a banking ledger excerpt. Is such an excerpt sufficient? And what should happen in the absence of the consumer? Should she be required to lodge an objection at all? The CJEU does not answer these questions.
In its case law on other types of debt collection proceedings, the CJEU did not consider an "inversion of the dispute" to be contrary to EU (consumer) law in itself, as long as there were judicial remedies available to consumer. We have brought this up in previous blog posts.
However, PKO Bank Polski shows why a reliance on the consumer's initiative might be problematic, exactly because of the procedural obstacles discussed in light of Article 47 Charter. Removing those obstacles is a first step. Preventing creditors from circumventing judicial control – by allowing them to resort to extrajudicial enforcement procedures or to withhold information from the court – would be the next.