Transparent language of consumer credit contracts - CJEU in A. S.A. (C-212/20)

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On November 18, the CJEU issued a judgment in the Polish case A. S.A. (C-212/20), which once again inquired as to what exactly Polish consumers would need to prove to claim unfairness of a term in a credit contract indexed to Swiss francs, and as to consequences of finding such a term unfair. Consumers in a given case signed a statement, when concluding the mortgage contract, that they were aware of the risks of indexing their credit to a foreign currency. Further, the statement mentioned that consumers were informed about their credit rates being determined in a foreign currency, but needing to be paid back in PLN (Polish zlotys) pursuant to the rules in the attached bank regulation.

The contested provisions of the bank regulation refer to the way in which the indexation in the foreign currency should be calculated, which could be interpreted in more than one ways. Further, the national court inquired as to the feasibility of placing on banks an expectation to precisely determine how the credit rates should be paid back (and following which indexation mechanisms for a foreign currency), when a credit contract is concluded for 40 years and these mechanisms are likely to keep on changing (para 25). The national court asked whether it could look for a common intention of the parties as to the calculation of the credit rates to determine the precise effect of the indexation clause (para 26).

The judgment in this case unsurprisingly reiterates previously mentioned key points that courts should follow when interpreting consumer credit contracts and assessing their terms' fairness: 1) transparency is crucial; 2) courts may not interfere to alleviate the consequences of unfairness for the banks.

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The court clarifies first that the current case does not pertain to core terms, which means that the consumer credit terms needed to be transparent pursuant to Article 5 UCTD (which de facto is not much different than transparency requirement of Article 4(2) UCTD - see again para 38). The CJEU reiterates the most recent requirement for the national court to interpret and apply transparency requirements broadly (from BNP Paribas judgment, see here) (paras 41-42). An average consumer needs to understand the specific functioning of the calculation method of the interest rate to be able to assess on the basis of unambiguous and comprehensible criteria potentially significantly adverse economic consequences for consumers' financial obligations (para 42). The CJEU generally agrees that a credit contract concluded for 40 years may hinder the lender in foreseeing all the possible financial consequences which the indexation mechanism may lead to (para 51). However, this should not excuse the lender not specifying all the criteria used to determine the interest rate (para 53), which here seemed to be left unsaid (paras 46-48). The consumer may not know exactly how much they will need to pay at which point of time in the future, but they should know exactly how at any one point of time that interest rate will be calculated (paras 53-54). This would protect consumers against their information asymmetries.

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The CJEU reiterates that non-transparency of a standard term is one of the elements that courts should consider in the unfairness test (para 58). However, the Court does not doubt the unfairness of a term that prevents consumers from estimating the scope of their financial obligations under a credit contract (para 64). Further, the national courts continue to have to refrain from supplementing unfair contractual provisions in a way that would give them effect by eliminating the unfair element (paras 67-68). That prohibition applies even if the interpretation by the national court of the standard term attempted to give effect to the shared understanding of the clause by the parties.

European Data Protection authorities speak up on targeted advertisement

 Dear readers, 

this is a teaching-intensive autumn across European universities - with all the excitement, uncertainty and overall strains of being mostly back in class after over a year of mostly living room lecturing. 

This, however, should not mean that we let crucial developments go unnoticed: last week, in fact, the European Data Protection Board (EDPB) has issued its most resolved opinion yet on the matter of privacy and behavioural tracking. Cookies, in other words - a staple not only of many people's secret kitchen stashes but also of equally elusive locations on our devices. 

The occasion for issuing this opinion is commenting on the Commission's Digital Services Act, which according to the Board should be brought more clearly in line with data protection rules. Couched among guidelines and standpoints on a number of highly salient issues - from counterterrorism to face recognition AI - the EDBP has called for 

1) considering a phase-out of targeted ads based on "pervasive tracking";

2) in any event, prohibiting targeted ads addressed at children.   

The opinion does not expand on the reasons for such standpoint, but mainly refers to previous positions  contained in comments on the DSA by the European Data Protection Supervisor (EDPS) and the European Parliament. In fact, criticism of the current rules' focus on informed consent has been around at least for the better part of the past decade (see for a classic Frederik Borgesius). 

The European data protection board is composed of representatives from the national data protection authorities. As a collective body mirroring positions in the Member States, its position can perhaps have more sway than the occasionally more principled stances of the EDPS.