Facts
In 2006, QE was granted a loan to purchase immovable property from Caisse régionale de Crédit mutuel de Loire-Atlantique et du Centre Ouest to be repaid over 20 years. The contract established that Caisse was entitled to accelerated and immediate repayment of the outstanding amount in case of a delay in the payment of more than 30 days by QE. According to the agreement, this repayment could be triggered without the need for the bank to present a formal written demand. QE could however ‘request an amendment to the payment schedule’ to avoid non-payment (para 7). In late January 2013, the bank triggered accelerated repayment, without any formal written demand, when QE did not pay the instalments of December 2012 and January 2013. In 2015, QE’s home was repossessed by Caisse régionale and the former brought an action before the court during the enforcement proceedings lamenting irregularities of the report of repossession. In 2019, the Court of Appeals of Versailles, rejecting QE’s claim, denied that the term establishing that the accelerated repayment procedure did not require a formal written demand was unfair in light of the criteria established in CJEU’s ruling Banco Primus.
Questions
The referring Court de cassation presented five questions, three of which are most relevant. It asked whether: .
- Under Articles 3(1) and 4 of Directive 93/13/EEC (UCTD) it is necessary to have a formal written demand even when the contract expressly excluded it
- Under Banco Primus the 30 days of delay can be considered serious non-compliance, in light of the term and amount of the loan
- The same provisions prohibit the accelerated repayment clause when national law ‘which requires a formal written demand (…) permits the parties to dispense with that step, in which case reasonable notice is required’ (para 18)
Ruling
It shall be recalled that Banco Primus (at 66) laid down four non-exhaustive criteria to determine if ‘a term in a contract causes a significant imbalance to the detriment of the consumer’ (para 29 of QE). The national court must consider whether:
1. The right of the bank to request the totality of the loan depends on whether the non-compliance by the consumer concerns an obligation of essential importance within the contract
2. The right ‘is provided for in cases in which such non-compliance is sufficiently serious in the light of the term and amount of the loan’ (para 29)
3. The right, absent a specific contractual provision, derogates from the ordinary law
4. national law establishes ‘adequate and effective means’ which enable the consumer to ‘remedy the effects of the loan being called in’ (para 29).
Because in Banco Primus the Court also ruled that Article 3(1) and 4 of UCTD must be interpreted as meaning that the unfairness of a term must be assessed considering all the circumstances which surround the conclusion of the contract, the criteria cannot be interpreted as being either cumulative or alternative.
Coming to the substance of the ruling, the Court answers by observing that – as it is evident from Banco Primus’ second criterion – determining the seriousness of the non-compliance depends on the overall evaluation of the terms and amount of the specific loan at issue. Since a debtor’s failure to comply with her obligation needs to be evaluated in the context of her contract, Articles 3(1) and 4 of the UCTD must be interpreted as meaning that a delay of more than 30 days in the payment ‘may, in principle (…) constitute, in itself, sufficiently serious non-compliance’ (para 41).
The first and third questions of the French supreme court then concerned whether Articles 3(1) and 4 of the UCTD must be interpreted as preventing the parties from inserting into their contract a term which allows automatic accelerated repayment once a certain period of time is over. The court asked, in essence, whether the term would be subjected and would fail the unfairness test. The CJEU first noted that the unfairness test aims to verify whether there exists a significant imbalance in the parties’ rights and obligations to the detriment of the consumer and that such test applies whenever a term has not been individually negotiated. Further, because, pursuant to Article 4(2), a term would escape the unfairness review exclusively if considered related to the main subject matter of the contract, the question is whether the term under analysis does relate to it or can be rather considered ancillary. The CJEU noted that a term relates to the main subject matter of an agreement whenever it lays down the essential obligations of the contract and thus characterises it. While this evaluation is for the referring court to carry out, the Court also observed that the clause at issue does not appear to fall within that definition. The answer to the questions is therefore that the provisions must be interpreted as precluding the parties from inserting such a term wherever the term a) does not concern the essential obligations of the contract; b) has not been individually negotiated; c) creates an imbalance to the detriment of the consumer.
With QE v Caisse régionale the CJEU essentially reiterates those which are the fundamental principles related to the so called ‘unfairness test’. Relevantly, it provided guidance as to the interpretation that a national court should give of what constitutes an ‘essential obligation’ in a loan contract.
