The CJEU issued another judgment today interpreting provisions of the Unfair Contract Terms Directive, in the case Kiss and CIB Bank (C-621/17). We have provided an extensive comment on AG Hogan's opinion in this case previously (AG Hogan in Kiss and CIB Bank...). The judgment has not yet been published in English (providing comments in that language seems low on the list of priorities of the CJEU - looming-Brexit impact?), but as our blogging team is international, we are able to provide you with a summary.
Generally, the judgment is rather brief but there are some important statements made in it, and some confusing ones. The national court may have a difficult time applying this judgment.
Core terms
The CJEU supports AG Hogan's opinion that it is the national court who needs to decide whether a given contract term is a core term (para. 33). In the given case the consumer claimed unfairness of terms establishing certain additional charges placed on him when he took out a consumer credit. To the CJEU it does not look like the consumer questioned the adequacy of these charges in exchange for the provided services, but rather more generally contested the reason for having been charged them. Consequently, the CJEU indicates to the national court that it was likely not a core term at stake, which makes art. 4(2) UCTD inapplicable (para. 35).
A subtle distinction has been made in this case. After all, the consumer demanded the recognition of unfairness as he was not told what services these charges were supposed to compensate. Therefore, he did question the existence of a relation between the charges and the services they were supposed to cover. However, pursuant to the CJEU, this apparently does not amount to questioning the adequacy of a charge in exchange for the provision of a service.
Interpretation of transparency under Art. 4(2) and Art. 5 UCTD and substantive transparency
An important side note perhaps, where the CJEU deviates from the reasoning of AG Hogan: In para. 36 the CJEU clearly states that the same requirements for the principle of transparency apply under art. 4(2) and art. 5 UCTD. The CJEU confirms again its judgment in the case Kásler. It also reiterates - after Bucura judgment - the importance of the substantive aspect of the principle of transparency (para. 37). As the contested terms specified the percentage of charges, the duration the charge would need to be paid for, as well as the method of its calculation, the CJEU considers the economic consequences of having to pay these charges to be foreseeable to the consumer (para. 39).
Are credit providers required then to list services for which they charge payments?
... maybe?? This is where the judgment could use some more of the transparency it is trying to evaluate. If we read paras. 43-44 the CJEU seems to indicate that despite there not being a general obligation for credit providers to list all services provided in exchange for various charges, the protection of a weaker contractual party awarded to consumers by the UCTD requires that consumers can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole. This should especially facilitate consumers' evaluation of whether various charges or services do not overlap. This btw is exactly the point that Mr Kiss was making, as he claimed that the charges he was asked to pay for are to compensate the bank for services, for which the bank already charges credit interest rates. On the one hand, the national court should then examine whether such an overlap does not occur, which forces the credit provider to account for the services that a given charge aims to compensate. On the other hand, however, the conclusion of para. 45 is not that subtle. There, the CJEU only draws attention to the first part of its conclusions: that the principle of transparency does not require credit providers to list all services provided in exchange for a given charge.
So, could we infer from the judgment that whilst credit providers do not have to list all services, they should list some of them, justifying why a given charge was set? Not necessarily, as the CJEU further repeats that not listing services for which a given charge was issued does not automatically breach the principle of transparency, provided the consumer can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole (para. 54). The credit provider may then take a risk of not listing the services that a given charge should cover, if they think they could later claim that the consumer should have had an idea of what these services might have been.
Art. 5 UCTD as part of the unfairness test under Art. 3(1) UCTD
Another important clarification, in spite of AG Hogan's opinion, is the CJEU stating that assessment of the transparency of a contract term pursuant to art. 5 UCTD is one of the elements of the unfairness test under Art. 3(1) UCTD (para. 49). The CJEU reiterates the principles of the unfairness test as established in older case law (Aziz and Constructora Principado) (paras. 50-51).
It will, therefore, not be easy for consumers to claim that not having received information on the list of services, for which a given charge is issued, they were unfairly treated by credit providers;
- first, they would have to be able to prove the lack of transparency, which the credit provider may dispute by stating the consumers should have been able to deduct what services a charge has reasonably covered;
- second, they would need to be able to prove that they were put at a significant disadvantage by the lack of specificity of these services, which the CJEU does not seem to be convinced had been the case as the consumer's legal position did not seem to deteriorate (para. 55).
