On 30 January 2020 AG Saugmandsgaard Øe issued his opinion in another case concerning 'floor clauses' used by a Spanish bank (C-452/18 Ibercaja Banco). See previously our discussion of this problem and explanation what 'floor clauses' are e.g. when we commented on the Gutierrez Naranjo case (Spanish 'floor clauses'...).
In this particular case a consumer concluded in 2011 a mortgage loan agreement with Caja de Ahorros with a variable interest rate, establishing that the interest rate will never exceed 9.75% and will not drop below 3.25% (floor clause). In 2014 the bank Ibercaja substituted Caja de Ahorros in the loan agreement and concluded an additional agreement with the consumer titled 'novation contract changing the loan'. The latter contract lowered the floor clause to 2.35%. It also included a term confirming the validity and application of the loan agreement, its terms, and having parties waive their rights to make any claims based on the loan agreement, also in regard of the payments that have already been made under the loan agreement. That novation contract had an added in consumer's handwriting note, signed by the consumer, attesting to the consumer's awareness and understanding of the fact that the interest rate will never drop below 2.35%.
It is, therefore, clear that the Ibercaja bank tried to protect itslef from the floor clause being declared as unfair, following the judgment of the Spanish Supreme Court in 2013 on this matter, by asking consumers to explicitly acknowledge the floor clauses in the contracts in a novation contract (see also paras 21-22). This action preceded the Gutierrez Naranjo judgment, where the CJEU confirmed the unfairness of the floor clauses and did not allow Spanish courts to limit consequences for the banks of the use of such unfair terms. The question then in this case is whether the consumer could still claim the floor clause to be unfair despite the novation contract and the consumer attesting to the awareness and understanding of the consequences of the loan agreement?
AG Saugmandsgaard Øe first notes that the classification of the contract concluded between the consumer and bank Ibercaja should be left to the national law to determine. There is indeed a dispute in Spanish law whether such an agreement is a novation contract or a settlement, but as this classification has no link to EU consumer law, it is not for the CJEU to solve this query (para. 28).
A novation contract MAY validly change an unfair term
The main point highlighted in the opinion is that pursuant to the CJEU's case law, the consequence of an unfair term being not binding for the consumer, does not mean that the term is void but rather that it is voidable (paras. 37-38). In Banif Plus Bank case the CJEU has already declared that the consumer may decide to stay bound by a contract containing an unfair term provided that consumer's decision follows from a 'free and informed consent' (paras. 39-40). This leads AG Saugmandsgaard Øe to infer that if consumers freely and on an informed basis decide to novate a loan agreement and waive their rights to claim unfairness of floor clauses, they should have a right to do so (para. 41), whether this decision is made as a result of a court informing them of their rights or on a contractual basis (para. 42). Of course, this may only occur after the problem with the terms in the contract has already arisen and not beforehand (paras. 43-44). However, AG Saugmandsgaard Øe is not blind to the possibility that consumers signing such a novation contract might have not had all information to their disposal that would allow them to make such a free and informed choice or might not have had an actual choice to negotiate the contract terms (para. 51). Therefore, the national court needs to consider this on the circumstances of the given case, especially whether the bank did not impose the term on the consumer, acted in good faith, provided transparent terms and did not skew the contractual balance between the parties (para. 54).
Consumer ACTIVELY contributes to the adoption of the term
AG Saugmandsgaard Øe emphasises that there is a rebuttable presumption that any standard terms that have been pre-drafted by a trader are not individually negotiated terms and it is the trader who has the burden of proof of the contrary, whilst with all other terms it is the consumer who has to prove that the term was not individually negotiated (para. 61).
To prove that the term is individually negotiated, the bank here would not only need to prove that it conducted discussions with the consumer about the contractual terms, but also that the consumer took an active part during these discussions in setting the content of the term (para. 63). AG Saugmandsgaard Øe suggests that it would not be a sufficient proof of the conducted negotiations for the bank to claim that the floor clause in a given contract was set at a level lower than in other loan agreements (para. 64).
Material transparency and consequences of its lack
When assessing whether a contractual term on the basis of which parties waived their rights to make claims was transparent, AG Saugmandsgaard Øe elaborated on what is required to determine it materially transparent. The following should be tested: whether an average consumer would have been aware of the legal issue related to the floor clause, as well as of rights they had as a result thereof on the basis of UCTD, and whether they knew of the choice to either sign the novation contract or refuse it and go to court instead, as well as whether they knew they were waiving that last right (para. 79). It is also relevant whether consumers were given a reasonable time to make their decision (para. 81). Here, the consumer was not given the draft of the novation contract in advance of the meeting nor given a chance to take it home and think about it before signing it. Looking at the particular case, the AG also emphasises the broad scope of the waiver agreement and the possibility that the consumer was completely not aware of the unfairness of floor clauses when signing the novation contract (para. 80). The fact that there was a general knowledge, according to the Spanish Supreme Court, of the problem of unfairness of floor clauses and of its judgment in that case, should not release the bank from giving individualised information about this to the consumer. Moreover, the fact that there was a handwritten note confirming consumers awareness and understanding of a floor clause, might not be sufficient to evidence actual understanding of a consumer, esp. if that handwritten note was dictated by the bank (para. 82). Even more interestingly, the AG then follows in stating that just the lack of transparency could amount to unfairness in this case, as it would take away a possibility of consumers providing free and informed consent for contract novation (para. 83).
