General information and a representative example in (mortgage) loan contracts C-85/24

The CJEU was given the opportunity to interpret Directive 2014/17/EU on Mortgage Credit (MCD) in C-85/24 Verein für Konsumenteninformation v BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG.  While mortgage loans are a frequent issue infront of the CJEU, the legal interpretation usually turns on Directive 1993/13/EC on Unfair Contract Terms. This is a rare chance, as far as I am aware, there are only two other cases tackling the MCD. While the judgment was delivered last year, it remains relevant, as there is no more recent case on the issue, and the new Directive 2023/2225 on Consumer Credit (CCD2) contains the exact provision in Article 9(2)(e).

The Austrian bank in dispute offers several credit products to consumers. It provides general information on the products, including in an information sheet. The Austrian Consumer Protection Association brought an action against the bank, asking the court to prohibit the bank from including, in the information sheet only an example of a variable rate credit agreement, without also providing an example of a fixed rate credit agreement and an example of a mixed rate credit agreement, since it offers those three types of interest rates for those credit agreements. The bank argues that the information sheet does not seek to provide consumers with detailed pre-contractual information tailored to individual cases and specific customers. In its view, it cannot be required that a separate example be included for every conceivable form of interest rate in that information sheet.

The legal question for the CJEU was whether Article 13(1)(g) of MCD must be interpreted as meaning that a creditor who offers credit agreements, whether or not secured by a mortgage, at a fixed interest rate, at a variable interest rate or with alternating variable interest rate and fixed interest rate periods, must provide a representative example for each of the three types of credit agreements offered?

Article 13 (1) of MCD entitled ‘General information’, provides ‘Member States shall ensure that clear and comprehensible general information about credit agreements is made available by creditors’. Such general information shall include at least the (g)  a representative example of the total amount of credit, the total cost of the credit to the consumer, the total amount payable by the consumer and the annual percentage rate of charge.

The CJEU noted that the MCD establishes a two-level mandatory information system. The first level consists of ‘general information’, referred to in Article 13 MCD. According to Recital 38, that information should enable consumers to make their decisions in full knowledge by ‘educating [them] in relation to the broad range of products and services available and the key features thereof. Consumers should therefore be able at all times to access general information on credit products available’. The second level of information consists of the ‘pre-contractual information’ in Article 14 MCD, which includes ‘the personalised information needed [by consumers] to compare the credits available on the market, assess their implications and make an informed decision on whether to conclude a credit agreement.’ Thus, the purpose of ‘general information’ is not to provide consumers with detailed explanations tailored to each type of credit agreement offered by the creditor and to each individual case; such explanations must be communicated to them under the ‘pre-contractual information’. They are intended only to inform consumers in the preliminary stage of their credit search.

The CJEU also addressed the question of what constitutes a representative example. In that regard, Recital 53 of MCD is helpful. It explains that ‘when determining the representative example, the prevalence of certain types of credit agreements in a specific market should be taken into account. It may be preferable for each creditor to base the representative example on an amount of credit which is representative of that creditor’s own product range and expected customer base, as these may vary considerably among creditors.’ The CJEU then clarified that ‘in assessing the representative nature of the example to be provided, some factors may be taken into consideration, namely, for example, the average duration and total amount of credit granted for the type of credit agreement under consideration and the prevalence of certain types of credit agreements in a specific market.’ Regarding the annual percentage rate of charge on the information sheet, the consumer's preferences and the information provided should, where possible, be taken into account, and the creditor or credit intermediary should make it clear whether the information provided is illustrative or reflects the preferences and information given. In any event, the representative examples should not contravene the requirements of Directive 2005/29/EC on Unfair Commercial Practices.

Using literal, contextual and teleological interpretations, the CJEU concluded that the practice of creditors who provide different types of credit products is compliant with the requirements of Article 13 Article 13(1)(g) of MCD if they provide by way of general information, only one example of the loans on offer, provided that that example is representative.

Fairness of indexing benchmarks in variable rate loans C -471/24

In a recent judgment delivered on 12 February 2026  in C-471/24 J.J.  v PKO BP S.A., the CJEU delivered further important interpretation on matters affecting loan contracts in variable rates. 

In this Polish case the consumer concluded a mortgage loan contract with variable rate of interest, which was calculated on the basis, first, of the WIBOR 6M benchmark, an interest rate benchmark, within the meaning of Article 3(1)(22) of Regulation 2016/1011, the value of which was set at 1.79% on the date of conclusion of that agreement, and, secondly, of a fixed margin of 1.85%, the applicable rate being adjusted to reflect changes in that index on a six-monthly basis.

As the consumer alleged the unfairness of the term, this gave new opportunities to the CJEU to interpret Directive 1993/13/EC on Unfair Contract Terms.

With the first question, the CJEU was asked whether the term setting out the variable rate of interest can be assessed for its fairness under Article 1(2), given the influence of Regulation 2016/1011, which would qualify a term as one that reflects ‘mandatory statutory or regulatory provisions’.  First, the CJEU importantly noted that although Article 1(2) relates to statutory or regulatory provisions of Member States and not EU law, as stated Recital 13 of the Directive the  'the provisions contained in acts adopted by the EU legislature in the form of regulations must be treated, in that regard, in the same way as the statutory and regulatory provisions of the Member States, in view of the effects of those regulations as laid down in the second paragraph of Article 288 TFEU, where such provisions of EU law seek, in the same way, to determine in a mandatory or supplementary manner the rights and obligations of the parties to certain contracts. The rationale for the exclusion established in Article 1(2) of Directive 93/13, …is, in principle, legitimate to presume that the national legislature struck a balance between all those rights and obligations, a balance which the EU legislature intended to preserve ... also applies where those rights and obligations are determined directly by the EU legislature itself.' (paras 73 and 74).

In answering the first question, the CJEU confirmed its earlier ruling in C-176/23 (see our report here), that '[a]rticle 1(2) must be interpreted as meaning that the exception provided for therein does not cover a term in a mortgage loan agreement stipulating a variable interest rate based on a benchmark, within the meaning of Regulation 2016/1011, and a fixed margin, where the statutory or regulatory provisions applicable to such a term merely establish a general framework for the setting of the interest rate for such contracts, while leaving it open to the seller or supplier to determine the contractual benchmark or the fixed margin which may be added to the value of that index'. 

The second question related to whether a term in a mortgage loan agreement with a variable rate of interest based on a benchmark could be the main subject matter and, as such, exempted from the scrutiny of fairness based on Article 4(2).   According to Article 4(2) the assessment of the unfair nature of the terms may relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other hand, in so far as those terms are in plain, intelligible language. The question, therefore, here was the interpretation of the meaning of plain and intelligible in this context; whether where a mortgage loan agreement contains a term stipulating a variable interest rate based on a benchmark, within the meaning of Regulation 2016/1011, the transparency requirement arising from that provision imposes on the creditor certain specific obligations to provide information as regards the methodology of that index. The claimant alleged that the bank did not provide reliable, intelligible and complete information concerning the risk associated with the application of a variable interest rate and the mechanism for determining the WIBOR 6M benchmark, in particular as regards the influence that the banks providing the input data which was used to set that benchmark; the banks participating in setting the benchmark, including PKO, could exert influence on the benchmark; the input data did not come from transactions actually carried out on the Polish interbank market, but of price offers made on that market, which conferred discretion on the contributors to the benchmark.

The CJEU reiterated its previous position that in this context the transparency requirement must be understood as requiring an average consumer, who is reasonably well-informed and reasonably observant and circumspect, is in a position to understand the specific functioning of the method used for calculating that rate and thus evaluate, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term on his or her financial obligations (para 86). Moreover, compliance with the requirement of transparency must be assessed in light of all relevant facts, including not only the terms contained in the agreement concerned but also the promotional material and information provided by the lender during the negotiation  (para 87). Therefore, ‘[a]ccount should also be taken of the fact that the main elements relating to the calculation of a contractual reference index are easily accessible, on account of their publication, on condition that, in the light of the publicly available and accessible information and the information provided, as the case may be, by the lender, an average consumer, who is reasonably well informed and reasonably observant and circumspect, was in a position to understand the specific functioning of the method used for calculating the variable interest rate, in particular in so far as it involves a reference index, and thus to assess, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term on his or her financial obligations (para. 88).

Moreover, in order to assess whether a term in a loan agreement which falls within the scope of Article 4(2) satisfies the requirement of transparency imposed by that provision, it is appropriate to take into consideration all the provisions of EU law laying down obligations relating to information for consumers which may be applicable to the agreement concerned. The CJEU then examined information duties in Directive 2014/17/EC and Regulation 2016/1011, and concluded that these read together, lay down precise obligations to provide information to consumers as regards, first the terms of mortgage loan agreements setting a variable interest rate referring to a benchmark covered by that regulation and, second, the benchmarks, and that those obligations are divided between the creditors and the administrators of those benchmarks (para 101). The CJEU concluded that ‘the transparency requirement arising from Article 4(2) does not impose on the creditor certain specific obligations to provide information as regards the methodology of that benchmark. The fact that the creditor has complied with all the obligations to provide information imposed on it by Directive 2014/17 in respect of such a term and, if it has provided additional information, has not provided any information giving a distorted picture of that benchmark is such as to establish that that creditor has satisfied that requirement of transparency as regards that term.’

The third question called for interpretation of Article 3(1) in this context, according to which a contractual term which has not been individually negotiated is to be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. The question here was whether the very way the benchmark is determined renders the term substantively unfair. The claimant argued that the way the benchmark is determined allows PKO to influence the benchmark and, in turn, the borrower's interest payable. The banks thus afford themselves a ‘hidden margin’ (para 107).

The CJEU noted that Regulation 2016/1011 contains a set of detailed provisions on benchmarks, including the provision of input data, in particular as regards the nature of those data and their reliability, and the use of those benchmarks. Consequently, ‘the use, in a mortgage loan agreement, of a benchmark which, at the time that agreement is concluded, may be regarded as complying with the requirements of the framework established by Regulation 2016/1011, in particular as regards its methodology, in the light of the control provided for by that regulation, cannot, in principle, be, in itself, such as to create, to the detriment of the consumer, a significant imbalance in the parties’ rights and obligations, notwithstanding the fact that the creditor is one of the banks which provide the input data used by the administrator of that index to determine its successive values’ (para. 129).

The answer to the third question is that Article 3(1) must be interpreted as meaning that, ‘where a term in a mortgage loan agreement stipulates a variable interest rate based on a benchmark, within the meaning of Regulation 2016/1011, first, the lack of information on the part of the consumer concerning certain specific features of the contractual benchmark, in particular the fact that its methodology provides for the use of input data which does not necessarily correspond to actual transactions and the fact that the creditor is one of the banks contributing to the determination of that index, and, secondly, those specific features themselves are not such as to render that term unfair, provided that that index could be regarded as consistent with that regulation at the time of the conclusion of that contract.’

Legislation based contract amendments and the review of unfairness C-176/23

On 30 May 2024, the CJEU delivered C-176/23 UG v Raiffeisen Bank SA an important judgment that is highly relevant today and covers an important and not frequently adjudicated question - the issue of the mandatory terms exception in Article 1(2) and the way it applies in the highly regulated environment of a consumer loan contract. Based on the 'contractual terms which reflect mandatory statutory or regulatory provisions ... shall not be subject to the provisions of this Directive.’

In this case, the consumer entered into a variable-rate credit agreement with Raiffeisen Bank, indexed to the Swiss franc. Based on the Romanian mandatory legislation OUG No. 50/2010, the term relating to the determination of the variable rate had to be amended so that it was linked to an objective index increased by a margin fixed for the entire duration of the agreement. Unsatisfied with the new interest rate, the consumer sued the bank, alleging that the term was unfair.

The first legal question before the CJEU was whether the term could be assessed for fairness, given that it was inserted into the contract as required by mandatory legislation. Given that the term was not a copy-paste of a legislative provision, but rather an action based on the legislation, the CJEU addressed whether the term reflected mandatory rules.  In answering the question, the CJEU ruled that, in this situation, the term can be assessed for fairness because the legislation was not overly prescriptive and left the bank a degree of discretion to determine the variable interest rate. In the words of the CJEU, the ‘legislation merely establishes a general framework for fixing the interest rate for that agreement, while leaving a margin of discretion to that seller or supplier as regards both the choice of reference index for that rate and the size of the fixed margin that can be added to the latter.’ This approach was confirmed by the CJEU in its latest case on the matter C-471/24 PKO BP (see our report here).

The second question raised a question of whether such an amended term is not assessable for fairness under the general test of fairness in Article 3(1) even if it has been inserted into the contract without a negotiation with the consumer? The CJEU provided an expected answer to this question, confirming that this is the case, given that the entire UCTD, including the test of fairness, is designed to protect against unfair individually non-negotiated terms, and some terms are exempted from the security of fairness, against that default provision. Although the second question is somewhat unusual and, at first glance, seems redundant, it raises an interesting question about the hierarchy among the provisions of the UCTD. Indirectly, the CJEU here seems to confirm the natural reading of the UCTD that Article 1(2) prevails over Article 3(1), in the sense that the term must first be within the scope of the UCTD to be assessable for fairness. Conversely, if a term is exempted from fairness security by virtue of Article 1(2), this cannot be remedied by Article 3(1). 

Overall, the judgment provides an important contribution to EU consumer law and to the interpretation of the relationship of legislative interventions imposing mandatory rules on the contracting parties and the UCTD. These are relevant in the post-2008 environment, which incentivises legislative intervention in matters that would previously have been left to the parties (see more on this relationship here).