In Joined Cases C‑84/19, C‑222/19 and C‑252/19 (here),
the CJEU mainly interpreted the Unfair Terms Directive. The CJEU’s decision is
comprehensive and it covers all central aspects of the regime imposed by the
Unfair Terms Directive: its scope of applicability (including the exclusion of
terms derived from mandatory legislation, present in Article 1(2)), its
unfairness assessment (including its requirements, present in Article 3(1)) and
the obligation to draft contract terms in plain, intelligible language (present
in Article 4(2)). Overall, this decision does not surprise, but it does
summarize relevant recent case law under what can be described as a
mini-lecture on the Unfair Terms Directive.
All three cases involved contracts
between credit institutions and consumers, particularly the recovery of sums
claimed by those credit institutions under consumer credit agreements. In all
three cases, the total cost of the credit was between 2000-2500 euros. However,
in all three cases there were high non-interest related costs, such as costs
contractually designated as ‘commission fee’, ‘initial payment’, ‘fees for the
grant of the loan’, ‘management fee’ and ‘administrative fees’. In general,
while these costs were mentioned in several contractual clauses, they were not defined
or explained. Additionally, all three cases concern a Polish law provision
whereby there is a maximum amount of non-interest related credit costs that can
be claimed from the consumer (Article 36a of the Law on Consumer Credit). That
provision also establishes the formula according to which that amount must be calculated.
Case C‑84/19
In case C-84/19, the referring court
asked whether a contract term that establishes non-interest credit costs (such
as ‘commission fees’) within the maximum upper limit established by national
legislation is excluded from the scope of the Unfair Terms Directive (Article
1(2)). Moreover, the referring court posed a very relevant question regarding
the principle of transparency and its materialization. In specific, the
referring court questioned whether a contractual term can be considered to be plain
and intelligible if the various types of costs it introduces (such as ‘commission
fee’ and ‘initial payment’) i) do not explain in return for what specific
services they are charged and ii) do not differentiate between similar
concepts. Finally, the referring court asked whether the contract term in
question is considered a part of the main subject matter of the contract
or whether it relates to the adequacy of the remuneration against the
service provided, in which case, according to the Unfair Terms Directive, an
unfairness assessment would not be possible unless the term was not drafted in
plain, intelligible terms (Article 4(2)).
Regarding the first question, the CJEU highlighted
that in order to trigger the exclusion from the Unfair Terms Directive’s scope two
conditions must be met by the contractual term in question. First, it must
reflect a statutory or regulatory provision; second, that statutory or
regulatory provision must be mandatory (para 59). The fulfillment of these
conditions must be checked by the national court. However, the CJEU stated that
the Polish law provision in question does not ‘determine the rights and
obligations of the parties’ but rather ‘confines itself to restricting their
freedom to set the non-interest credit costs above a certain level’ (para 61).
Just like in the recent Mikrokasa case (which the CJEU often cited; see our blogpost on it here),
the CJEU concluded that the contract term in question is not excluded from
the scope of the Unfair Terms Directive.
The case gets interesting regarding the
CJEU’s discussion of the transparency obligations present in Article
4(2) of the Unfair Terms Directive. The CJEU reformulated the transparency-related
question and left out the two interesting dimensions concerning explanation and
differentiation of credit-related concepts. In the words of the CJEU, the
referring court asked whether it is possible, under Article 4(2), to assess the
unfairness of a contract term that ‘imposes on the consumer costs other than
the payment of contractual interest’ but that does not ‘specify either the
nature of those charges or the services which they are intended to reimburse’. It
would have been interesting to see the CJEU directly address the original
transparency-related question, since it asked about the meaning of the
obligation to inform transparently (or to draft contractual terms
transparently) in two different levels: explanation of concepts and
differentiation of concepts.
Answering the question, the CJEU
highlighted, once again, that the exception in Article 4(2) must be interpreted
strictly, since a broad interpretation would result in decreased consumer
protection (para 66). After that, the CJEU reminded that a term that forms the
main subject matter of the contract must be a term that characterizes the
contract in question and that describes the
essential obligations of B2C contracts
(para 67). Interestingly, the CJEU defines ‘adequacy’ in the context of
Article 4(2) as ‘the relationship between the payments required and the service
to which they relate’ (para 81). In this case, since the contract terms did not
specify the service to which the charges referred to as ‘front-end fee’ and ‘commission’
related, the CJEU concluded that it was not possible to discuss an
adequacy problem. Furthermore, the CJEU states that it is up to the national
court to determine whether the obligation to make payments concerning additional
services (external to the loan) is an essential element of the agreement (para
71). Still concerning transparency, the CJEU
repeated what it has said on multiple other judgements and reiterated the idea
of substantive transparency: contract terms should not only be
grammatically (or formally) intelligible, but they must allow the consumer to assess
the economic consequences deriving from them (para 73). In paragraph 75,
the CJEU specified that for the contract term to be considered transparent it
is important that the nature of the services provided in return for the costs
imposed can be ‘reasonably understood’ or inferred from the contract. Besides,
the consumer must be able to understand that there is no overlap between
the different costs or between the different services for which the costs are
due. In a way, the CJEU states that the duty to draft contract terms in plain,
intelligible terms imposes the duty to differentiate between costs or services.
All this seems, according to the CJEU, unclear; the CJEU considered it difficult
to assume that the consumer had an ‘understanding of his payment obligations
and of the economic consequences of the terms providing for those charges’
(para 78). In conclusion, if the contract terms give rise to confusion
on the part of the consumer concerning her obligations – which is for the
national court to determine – then those contract terms are not drafted in
plain, intelligible language and, therefore, do not fall under the scope
of the exception of Article 4(2).
Case C‑222/19
In case C-222/19, the referring
court asked the CJEU whether a contractual term which has not been individually
negotiated and which imposes non-interest related credit costs (including costs
related to the lender’s professional activity) below a statutory maximum upper
limit may be regarded as unfair under Article 3 (para 89). The CJEU reminded
that it is up to the national court to consider a given contractual term
unfair, and that the CJEU merely provides guidelines (para 91).
Additionally, the CJEU stated that, in order to determine whether there is a significant
imbalance created by the contract terms that impose costs beyond interest on
the consumer, it is important to go beyond a quantitative economic
assessment. In particular, it is not enough to compare the total value of
the contract and the costs charged to the consumer based on that term (para
92). There must be a ‘sufficiently serious impairment of the legal situation’
of the consumer, which can be, for example, the restriction of rights that the
consumer contractually enjoys or the constraint on the exercise of those rights
(para 92). Moreover, in order to determine whether the imbalance is contrary to
good faith, the national court must assess whether the professional party could
reasonably expect that the consumer would have agreed to such a term
during negotiations (para 93). The CJEU noted, nonetheless, that the contract
term in question (which sets a non-interest related credit cost) could give
rise to a significant imbalance (even if it is below the maximum upper limit
established by national law) if, for example, the amount charged to the
consumer for granting and managing the credit was not proportional to
the amount of the credit. In order to determine this, the CJEU concludes, the
national court should take the remaining contractual terms into account (para
95).
Case C‑252/19
Finally, in case C-252/19,
the referring court asked the CJEU whether the applicable Polish law provisions
are compatible with the Consumer Credit Directive. In particular, the
referring court wondered whether, based on Article 3(g) (definition of ‘total
credit costs’) and on Article 22(1) (maximum harmonization of the Consumer
Credit Directive), Polish law can impose a calculation of the upper limit of non-interest
credit costs that includes not only the credit costs usually associated with
the conclusion of a consumer credit agreement but also costs related to the
lender’s professional activity. The referring court therefore questioned
whether this method of calculation was in fact creating a new type of cost that
is not compatible with the harmonized areas, which would undermine consumer
protection.
The CJEU briefly addressed
this question by once again referring the answer to the Mikrokasa case.
In particular, the CJEU stated that the concept of ‘total cost of the credit’
in Article 3(g) of the Consumer Credit Directive is intentionally broad
and it is meant to cover all costs that the consumer must pay in connection
with the credit (except notarial fees). Article 3(g) does not impose any
limitation on the type of costs that may be imposed on the consumer. Therefore,
the CJEU concludes, the Consumer Credit Directive does not exclude that
costs associated with the lender’s business activity are imposed on the
consumer, which means that there is no incompatibility with Polish national law.
