Earlier this year we reported on the opinion of the Advocate-General Kokott in case C-176/17 Profi Credit Polska. Today the Court of Justice delivered its judgment on the case, largely relying on the AG's submission. By describing which elements of the Polish "fast track" procedure for the enforcement of promissory notes were not compatible with Directive 93/13/EEC, the Court further develops its case law on the effectiveness of the unfair terms framework.
Facts of the case
The case involved a Polish consumer who entered into a credit agreement with Profi Credit, a financial institution. The loan was secured by a promissory note in an unspecified amount, which the debtor signed in advance.
Following the debtor's failure to repay the loan on time, Profi Credit moved towards enforcing the promissory note. Polish procedural law provides for a specific type of proceeding which creditors can use for this purpose, namely the order for payment procedure.
The order for payment procedure is designed as a speedier way of enforcing well-documented (mainly) monetary claims. Several solutions have been put it place to make that possible. Firstly, as a general rule, the case is examined in chambers. Secondly, if the evidentiary requirements are fulfilled, the court issues an order for payment, by which it instructs the defendant to settle the claim in full, plus costs, within two weeks, or to lodge an objection (within the same period). With regard to claims arising from promissory notes, formal validity of the note is the only factor to be considered by the court before issuing an order for payment. Only if the debtor objects to the order for payment, arguments related to the underlying contractual relationship (e.g. consumer credit agreement) can be considered.
The Court began by recalling its earlier case law related, in particular, to the importance (and the boundaries) of ex officio control. In short:
Following the debtor's failure to repay the loan on time, Profi Credit moved towards enforcing the promissory note. Polish procedural law provides for a specific type of proceeding which creditors can use for this purpose, namely the order for payment procedure.
The order for payment procedure is designed as a speedier way of enforcing well-documented (mainly) monetary claims. Several solutions have been put it place to make that possible. Firstly, as a general rule, the case is examined in chambers. Secondly, if the evidentiary requirements are fulfilled, the court issues an order for payment, by which it instructs the defendant to settle the claim in full, plus costs, within two weeks, or to lodge an objection (within the same period). With regard to claims arising from promissory notes, formal validity of the note is the only factor to be considered by the court before issuing an order for payment. Only if the debtor objects to the order for payment, arguments related to the underlying contractual relationship (e.g. consumer credit agreement) can be considered.
Fortunately for the debtor, the national court confronted with the creditor's request run into doubts as to the compliance of the described procedure with Directive 93/13/EEC. Consequently, it decided to stay the proceedings and ask the Court of Justice whether its lack of power to examine fairness of the underlying consumer credit agreement already at the first stage of the order for payment procedure is in line with Article 7(1) of the UCTD. Pursuant to that provision, Member States shall ensure that "adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers".
Judgment of the Court
The Court began by recalling its earlier case law related, in particular, to the importance (and the boundaries) of ex officio control. In short:
- Effective protection of consumer rights under the UCTD can be guaranteed only if the national procedural system allows the court to check of its own motion whether terms of the contract concerned are unfair.
- Such an assessment can only be undertaken if the national court has access to the legal and factual elements required for that task.
- Establishing procedures for examining the unfair nature of a term is principally a task of national authorities. However, such procedures should not be less favourable than those governing similar situations subject to domestic law (principle of equivalence) and should provide for a right to an effective remedy, as required by Article 47 of the Charter.
Since nothing in the case at hand indicated any concerns related to equivalence, the entire focus of the judgment remained on the principle of effectiveness. The Court observed in this regard that the analysed Polish procedure provided national courts with an access to the legal and factual elements necessary for assessing the fairness of the underlying standard terms only after a consumer had lodged an objection. The key question was therefore whether such a baseline requirement imposed on the consumer (to lodge an objection in order to allow for the ex officio control) impinged upon his right to an effective remedy.
Similarly to AG Kokott, the Court - while generally remaining on the consumer's side - did not reply with a plain "yes". Instead, it emphasised the importance of establishing whether the detailed rules of the national opposition procedure gave rise to a significant risk that the consumers concerned would not lodge the objection required (para. 61).
More specifically, for a right to an effective remedy to be respected, consumers must be able to lodge an objection "under reasonable procedural conditions", in particular as regards time limits or costs.
According to the Court, the analysed Polish procedure fell short of these requirements on several accounts:
- [Time] the objection needed to be lodged within a time limit of two weeks;
- [Content] the defendant was required to indicate in the objection whether the order was disputed in whole or in part, set out the complaints on pain of inadmissibility and adduce facts and evidence;
- [Costs] the defendant was required to pay 3/4 of the court fee, while the seller or supplier was only required to pay the remaining 1/4.
All these factors taken together resulted, in view of the Court, is a significant risk that consumers concerned would not lodge the objection required, making the analysed national legislation incompatible with Article 7(1) of the UCTD.
Post scriptum
This is not the first time when Profi Credit found itself in the centre of public attention for the way it runs its business. Over the last decade the company has become an addressee of at least four decisions of the Polish consumer protection agency - the President of the Office of Competition and Consumer Protection (UOKiK). The relevant decisions concerned different types of alleged infringements: from misleading advertisements to the violations of information duties. In June this year the President of UOKiK drew his attention to the practices of the company once again and launched explanatory proceedings related, among others, to excessively high insurance fees linked to the credit agreements. Further information about these recent actions can be consulted here.
