Polish bankruptcy law fails consumers with unfair loan terms - CJEU in Wiszkier (C-582/23)

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In July 2025, the CJEU issued a judgment in Wiszkier (C-582/23), concerning a Polish case involving a consumer mortgage loan indexed to Swiss francs. In this instance, the consumer had to declare bankruptcy after being unable to meet, among other obligations, their mortgage payments. Although the bankruptcy court found that the contract potentially contained unfair terms, raising the possibility of the contract being null and void, Polish law prohibits this court from examining this issue further. Under Polish law, even if the unfairness of contract terms had not been previously raised by the consumer, the bankruptcy court is only competent to approve or reject a repayment plan based on a list of claims drawn up by the trustee (paras 26-27). At most, the court may stay the proceedings and refer the unfairness' matter to another competent, supervisory authority (paras 29 and 45). 

Unfairness assessment by the bankruptcy court 

Decision: Incompatibility with EU law. Unsurprisingly, the CJEU found Polish law incompatible with EU law. Specifically, it held that the Unfair Contract Terms Directive precludes national provisions that prevent a bankruptcy court from examining the unfairness of contract terms in a loan agreement underlying a claim included in the list of claims, or from amending that list, where no such assessment has been conducted by the authority preparing the list (para 58).

Although EU law leaves enforcement of consumer protection rules against unfair contract terms to the Member States, such national rules must comply with the principles of equivalence and effectiveness (para 40). The CJEU found that the principle of effectiveness was violated in this case. While Polish law allows a bankruptcy court to stay proceedings so that a supervisory court may assess the potential unfairness of contract terms, this process introduces delay and exposes consumers to further financial hardship. During the stay, the bankrupt's salary continues to be withheld by the bankruptcy estate, which may discourage consumers from raising objections based on unfair terms (para 46). Notably, monthly repayments set in bankruptcy proceedings are often lower than the salary amounts withheld during the proceedings (para 47), exacerbating the financial strain. Moreover, in this case, although the consumer had acknowledged all the claims listed by the trustee, this was done without legal representation and likely without understanding that an unfairness objection could be raised (para 52). The consumer only raised this issue. through legal counsel, once the case reached the bankruptcy court (para 53). The CJEU clarified that it is irrelevant whether the list of claims has become res judicata (para 55).

Interim measures by the bankruptcy court

Decision: The CJEU further ruled that national law must enable bankruptcy courts to grant interim measures to protect consumers while the fairness of a claim included in the list is under judicial review.

The Court reiterated that ensuring effective consumer protection against unfair terms may require granting interim measures, for example, adjusting monthly instalments during prolonged proceedings to prevent consumers from being forced to pay more than the amount actually due if the unfair terms were ultimately invalidated (paras 67-68). As noted by the referring court, the fear of higher interim payments to the bankruptcy estate may deter consumers from raising unfairness objections altogether (para 69). The court responsible for granting interim measures must consider: "whether there is sufficient evidence that the contractual terms concerned are unfair, whether there is a real possibility that the bankruptcy estate is already sufficiently funded to satisfy the creditors, with the exception, as the case may be, of the claim concerned, as well as the bankrupt's financial situation and the risk of that person having to endure a prolongation of the bankruptcy proceedings which could result in an unwarranted deterioration in his or her financial situation pending the conclusion of those proceedings." (para 71)

A milestone for Polish consumers claiming unfairness of Swiss francs mortgage loans - CJEU in Lubreczlik (C-396/24)

Yesterday, the CJEU issued a new judgment in the Swiss franc mortgage loans and their unfair contract terms saga, following a referral from a Polish court, in the case known as Lubreczlik (C-396/24). The referral was based on two cases, in which consumers concluded mortgage loans indexed to the Swiss franc rate. In both cases consumers claimed repayment of sums they had paid to the bank on the basis of their mortgage contracts being void due to unfair contract terms they contained. The bank counterclaimed seeking that consumers paid the full loan amount back to the bank. 

Previously, the Polish Supreme Court issued a judgment with a so-called 'two claims' theory (see declaration III CZP 11/20 from 16 February 2021 - in Polish here). This theory acknowledged that after a loan agreement is declared invalid, both parties (consumer and lender) have a right, "distinct and independent of each other, to repayment of monetary payments made in performance of that agreement. Each of the parties could therefore claim full repayment of the sums paid, whether or not it is still a debtor of the other party and regardless of the amount of its own debt" (para 26).

Imagine now situations (very common in practice), in which consumers have already paid the whole amount of their loan to the bank, or even paid to the bank sums exceeding the total loan value, on the basis of high interest rates. While waiting for their claims of unfairness to be adjudicated by Polish courts or the judgments to become final and the bank to return their money to them, they receive a lawsuit from the bank for the repayment of the full amount of the loan. Often, such a (de facto, repeated) repayment would either be financially impossible or significantly detrimental to consumers (even if made in the expectation of the eventual repayment by the bank of the same or higher sum of money) (para 27). Further procedural rules make it also feasible that any repayment by a consumer of the money to the bank will be immediately enforceable, while the bank's obligation to repay the consumer may take a long time to reach that stage (para 32). Consumers could theoretically argue for a set-off of reciprocal claims, but Polish procedural rules make such a declaration complex and not necessarily favouring consumer interests (para 28).

Repayment of the loan amount by a consumer

The CJEU leaves no doubt that Polish (case) law may not allow banks to claim repayment of the full loan amount, regardless of the value of repayments already made by consumers in performance of the loan agreement and "irrespective of the amount remaining due" (para 44). The CJEU recalls the need for the Member States to ensure that the national protection against unfair contract terms is a deterrent for sellers and suppliers against embedding such terms in their contracts (para 38). Further, national law needs to protect consumers against the detriment of having their contract's annulled as a result of them containing unfair contract terms (para 39). These obligations may result in Polish courts being required to "change established case-law", if following such national case law would lead to undermining EU consumer protection's objectives (para 43).

Polish courts should then disregard the Polish Supreme Court's theory of "two claims" in assessing the banks' claims for repayment of the full amount of loan by consumers, if consumers already had paid back at least part of the mortgage loan to the bank. This should mean in practice that banks claims filed against consumers should be scaled down in consideration of the actual repayments that consumers have already made. Strategic litigation by banks against consumers for the repayment of full loan amounts becomes much more risky as a result of this judgment.

Immediate enforceability of consumer repayments

The CJEU also addressed the matter of Polish courts being required to award of their own motion immediate enforceability to repayment claims made by banks against consumers, if consumers accepted such claims (and they may have good reasons to accept them - see para 51 of the judgment for more information). The Court considers also this practice contrary to EU consumer protection objectives, as long as Polish courts are not allowed to consider in their decision-making detriment to the consumer that such an immediate enforceability order would have (para 58). 

This part of the CJEU's judgment protects consumers against the immediate need to repay the money to the bank, which could have dissuaded them from progressing with their unfairness claims.

Overall, this judgment raises financial risks for these banks that were not keen so far to settle consumer cases and which have used various intimidation tactics to dissuade consumers from pursuing their claims. It may also lead to banks proposing more beneficial settlements to consumers and encourage consumers to negotiate settlement terms.

Validity of limitation periods for claiming mortgage costs back from banks - CJEU in Caixabank (C-484/21) and Banco Santander (C-561/21)

While many consumer lawyers are currently busy analysing the details of the opinion of AG Emiliou in Compass Banca case (C-646/22) (and we will add our own analysis of it in the coming days, too), on the same day (April 25) two judgments were issued by the CJEU clarifying the consequences of terms' unfairness on restitution of costs paid by consumers. Both in Caixabank (Délai de prescription) (C-484/21) and Banco Santander (Départ du délai de prescription) (C-561/21) Spanish courts posed questions concerning validity of various limitation periods for consumers raising a restitution claim for 'the costs clause'. The costs clause included in mortgage loan contracts obliged consumers to pay all the costs relating to the mortgage's creation. This may encompass notary, registry and agency fees.

The CJEU refers back to the Gutiérrez Naranjo and Others case (C-154/15 - with our comment here) to reaffirm the obligation of national courts to facilitate restitution of amounts consumers paid, which were imposed by an unfair contract term (e.g. paras 16-17 in C-484/21). Could national limitation periods stand in the way of such consumer claims? Previously, the CJEU already confirmed that limitation periods could be set in national laws as applicable to restitution claims brought by consumers in enforcing their rights from UCTD, however, these cannot make it in practice impossible or excessively difficult to exercise such rights (para 27 in C-484/21).

In short, regarding limitation periods for restitution claims, which are raised by consumers following a declaration of unfairness of terms setting the payment obligation, CJEU decided as follows:

1. They cannot start running from the date of the payment, irrespective of whether consumers were or could reasonably have been aware of the unfairness of terms at the time of the payment, or before the term was found to be void (paras 30, 32, 34-35 in C-484/21).
2. They cannot start running from the date on which the national supreme court delivered a judgment in a separate, earlier case, declaring a corresponding term unfair (C-484/21 and C-561/21). To pay attention to: The CJEU highlights here the lack of obligation for service providers to inform their consumers that terms in their contracts are equivalent in scope to terms in other contracts that have been found unfair (para 41 in C-484/21). Further, it mentions that average consumers cannot be 'required not only to keep himself or herself regularly informed, on his or her own initiative, of decisions of the national supreme court relating to standard terms contained in contracts of a similar nature to those which or she has concluded with sellers or suppliers, but also to determine, on the basis of a judgment of a national supreme court, whether a term included in a particular contract is unfair' (para 45 in C-484/21).
3. They cannot start running on the date of the CJEU's judgments, which confirmed, in principle, that limitation periods for actions for restitutions are compatible with EU law (provided they are equivalent and effective) (C-561/21). (for similar as above reasons + the fact that CJEU often leaves determination of unfairness to national courts - para 58 in C-561/21)
4. They can start running on the date on which the decision about unfairness of a term in a given case becomes final, without prejudice to the trader's right to prove that consumers were or could have been reasonably aware of the unfairness before the decision was made (paras 35-38 in C-561/21).

Facilitating enforcement of unfairness control - CJEU in Getin Noble Bank and Others (C-531/22)

Happy 2024 Dear Readers!

We are starting a new year of reporting with the reference to the last week's judgment in the Polish case referred to the CJEU as Getin Noble Bank and Others (C-531/22 - not yet available in English, but accessible in other languages). This judgments continues to provide guidance on the application of the Unfair Contract Terms Directive to terms in mortgage contracts indexed in Swiss Francs. The CJEU considered two questions/issues: 

1. Ex officio judicial authority to test unfairness while overseeing enforcement of a final payment order with res judicata status

To not keep you in suspense: The CJEU decided that national courts may ex officio assess unfairness in such circumstances, provided that: 1) national law did not allow for unfairness test at the moment of issuing of a payment order, or 2) if such unfairness test is only allowed if a consumer would have objected to the issued payment order, provided that there is a significant risk that a given consumer is not going to issue an objection. This risk could result from: the short time allowed for filing the objection, objection's costs compared to the debt amount, or the lack of obligation to provide consumer with all the information necessary to determine their rights in this respect (para 61). This is, in large extent, confirming Court's previous judgment in Leasing România judgment (C-725/19) (paras 50-51).

This is an important judgment to address some inefficiencies of the Polish civil law procedure that may limit the scope of the unfairness testing. Specifically, payment orders may be issued by Polish courts upon an electronic request by creditors, without the courts having either legal or technical access to contractual documents, on the basis of which this payment order is issued. If the debtor does not file an objection to the issued payment order within 2 weeks from its delivery, they become final with the res judicata status. This means that they may not be further questioned in enforcement proceedings (para 49). As the CJEU previously considered a 2 week timeframe too short to reasonably give a chance to consumers to file an objection (paras 54-55), this judgment clearly indicates the lack of compliance of the Polish civil procedural rules with the effective consumer protection framework against unfair contract terms. This finding is not weakened by the inertia of the consumer during previous judicial proceedings with them as a party, as the option to file an objection to the payment order is the only opportunity for the consumer to procedurally stop the enforcement proceedings, and as such the consumer needs to be given a real chance to do so (considering the timeframe, costs etc.) (para 60).

2. Recognition of an unfair character of a contract term, upon it having been entered into a register of unfair contract terms, also in subsequent judicial proceedings against a given consumer, even with a different trader involved and when the term has been differently drafted, but when it retained the same substance and led to the same consequences.

The CJEU first (paras 69-73) recalls the conditions for the validity of a register of unfair contract terms in national legal systems, which were first discussed in the Biuro case (see our comment here). Pursuant to the Court, the opportunity for national courts to compare a given contract term to a term already entered into a register after previous judicial proceedings, may lead to a more efficient and faster enforcement of the unfairness control, freeing consumers from harmful consequences of unfair terms in many contracts simultaneously (para 75). The finding of unfairness of a given term could then indeed be recognised and applied also in subsequent judicial proceedings - even with a different trader involved, and when the term has been differently drafted, but when it retained the same substance and led to the same consequences (para 78).

Alternative terms on performance, average consumers... tune in to CJEU in mBank (C-139/22)

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Today the CJEU decided another case on unfairness in mortgage loan agreements with an index-link to Swiss francs - in the Polish mBank case (C-139/22). The first part of the judgment is Poland-specific, as it refers to the validity and effect of a national register of unlawful terms, which Poland happens to have. This issue has already been considered in the previous Biuro case (see our comment on case C-119/15 here). The Court now reiterated that as long as the register is transparent, kept up to date, and the traders have an opportunity to question the applicability of the register in their particular case, national courts could benefit from such registers (paras 41-43). Hence, contested terms could be declared by national courts as unfair if their content has previously  been registered as unfair, provided that the court warns parties to the proceeding about this and gives the trader the opportunity to challenge this finding (para 45). 

The second question was more interesting: What happens if the mortgage loan contract contains a term that is likely to be unfair, however, it also contains another term, which allows consumers to disregard the unfair term and follow a different path for contractual performance? In this case, the contract included a term that obliged consumers to reimburse a loan index-linked to Swiss francs 'exclusively in the national currency as converted according to a rate of exchange freely determined by the bank' (para 52). This term was previously determined as unfair by Polish courts. However, the contract also included a term that allowed consumers instead to reimburse the bank directly in Swiss francs. This would allow consumers to choose where to obtain Swiss francs from, avoiding the conversion rates set by mBank. According to the bank, consumers could have then avoided the detrimental effect of the first term, which, again pursuant to the bank. would not lead to unfairness. The Court rightly rejects this argumentation. Contrarily, it emphasises that a contract containing such a mechanism - two alternative terms referring to the same obligation, one of which is unfair and one of which is lawful - per definition should be considered unfair (para 55). The trader could be seen as counting on consumers' 'lack of information, failure to pay due attention or a lack of understanding', which would lead them to re-pay the loan in the way set out by the detrimental, unfair term, with the other term then only providing a mechanism to avoid liability by the trader (para 55).

Interestingly, the Court makes the above-finding fully aware of the average consumer standard that applies to the interpretation of the UCTD provisions. On its basis, we could expect that reasonably well-informed and circumspect consumers, who are to read and attempt to understand the contract and its consequences, should recognise the better of the two options for re-payment. And yet... the Court does not think so.

The average consumer is mentioned by the Court when giving the answer to the third question: Does the fact that one of the borrowers worked for the bank exclude them from the scope of protection of the UCTD? The answer is: No. As the concluded contract does not pertain to the employment relationship, the sole fact that it is concluded with the employer does not mean that it could change its non-commercial purpose (para 69). Further, even if the consumer in this case had insights into exchange rates of mBank, which were not available to consumers not working for this bank, this did not mean that their 'more specialised' knowledge should exclude them from the scope of protection of the UCTD. The CJEU reminds that we refer to the objective benchmark of an average consumer and their knowledge. Thus neither less nor more consumer knowledge in a given case will matter (para 66).

Bad faith of sellers in unfairness cases - CJEU in CAJASUR Banco (C-35/22)

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In a recent case, from 13 July, in CAJASUR Banco (C-35/22), the CJEU reflects further on the need of national laws providing effective and equivalent consumer protection against unfair contract terms. In this Spanish case, the consumer succeeded in claiming unfairness of terms in a mortgage loan agreement. However, the bank appealed the order to repay consumer fees for the legal proceedings. Pursuant to Spanish law, only defendants who were in bad faith would need to pay such costs. The bad faith would be established if before the legal action the bank 'has received a due and substantiated demand for payment, mediation proceedings have been initiated or a request for conciliation has been made...' (paras 9 and 29-30). The consumer did not take such actions in this case. 

The question posed to the CJEU boiled down to: Whether if national laws prevented consumers from claiming back costs of legal proceedings, when such consumers have not taken any actions prior to brining proceedings against sellers, this would contradict Article 6 UCTD - providing effective sanctions against unfairness of contract terms. As the Member States have procedural autonomy, they may set rules regarding costs of legal proceedings, provided that these comply with the principles of effectiveness and equivalence (para 24). The CJEU reiterates its various previous rulings on the impact that awarding (or not) of costs may have on consumers' willingness to exercise their rights against unfair contract terms (paras 25-28). 

In light of facts of the given case, what struck the CJEU was the one-sidedness of the Spanish law requirement to initiate mediation/conciliation before legal proceedings. This burden is purely placed on consumers as plaintiffs in cases against unfairness (para 31). Whilst taking of such steps may help with releasing the pressure on the judicial system (argument of the Spanish Government), the CJEU legitimately then expects this burden to be shared between the parties. For example, banks could be expected to pro-actively approach consumers with contracts containing terms that have been established as unfair in settled national case law (para 32). If national law places such burdens solely on consumers, it does not encourage sellers 'to draw, voluntarily and spontaneously, all the consequences of the case-law on unfair contract terms and thus promotes the continuation of the effects of those terms.' (para 34). The CJEU, expecting active behaviour from the sellers, then continues to state that if in case of 'inertia on the part of the seller...' in contacting consumers and disapplying unfair terms to them, consumers start legal actions, this should not be held against them (para 35). Conclusively, the CJEU then recognises that national law could choose bad faith as a requirement for awarding costs of proceedings (para 38). However, national courts should be ready to recognise such bad faith also when banks, aware of consumers' weaker position, wait with admitting the claim until consumers' take action, just to avoid having to pay the costs of proceedings, instead of informing them of terms' unfairness of their own will (paras 36-37).

What looked at a glance as another judgment focused on a small procedural issue, actually  could have far-reaching consequences for consumer protection. If the reasoning of the CJEU is extrapolated to other situations when sellers have knowledge of unfairness of consumer terms but do not act on it, which would lead to the recognition of sellers acting in bad faith, in various national laws this could have further ramifications for award of damages, burden of proof, etc.

Average consumers not expected to conduct legal research - CJEU in Banco Santander (C-265/22)

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On July 13th, the CJEU issued a judgment further clarifying the principle of transparency under the Unfair Contract Terms Directive in variable-rate mortgage loan contracts, in the case Banco Santander (C-265/22). In such contracts the interest rate is variable with time, here: a new rate was to be determined every year for the following 12 months.  

In the Spanish case referred to the CJEU, consumers' interest rate was calculated with reference to the Mortgage Loan Reference Indices (IRPH). Consumers claimed that they were not informed as to the full impact of having such a reference rate, with relevant information either missing from the mortgage loan agreement or not being properly communicated to them. Whilst the Unfair Commercial Practices Directive was not yet applicable at the time the mortgage loan contract was concluded (2006), the Court could not consider whether the bank engaged in a misleading commercial practice. It was, however, able to assess that the UCTD may have been infringed if the bank's practice did not allow for applying to the IRPH a negative margin, in order to align the interest rate with the market rate.

The CJEU reiterates the main points on transparency from the Andriciuc and Others judgment (see our comment): Consumers require sufficient information to take prudent and well-informed decisions; mainly average consumers need to be able to estimate the total cost of the loan (para 53). This translates into an obligation, when variable-rate mortgage loan contracts are concluded, for average consumers to understand: the specific functioning of the method used for calculating that rate (para 55). This requires consumers to have easy access to the main elements relating to the calculation of the reference index (para 56). The national court in the given case needs to check whether the information provided in the agreement (with the index being published by the Bank of Spain and having been described in Annex VIII to the agreement) was sufficient for average consumers to become aware of the method of calculation of the variable interest rate (paras 57-58). Further, the national court should consider whether the lack of information in the loan agreement on a non-binding circular issued by the Bank of Spain could have been detrimental to the average consumer's ability to estimate the total loan cost. This in light of the circular stressing its significance for credit institutions (para 59). The CJEU seems to imply in para 60 that it would go to far to expect average consumers to conduct legal research, that is to try to find other documents of the Bank of Spain that could be applicable to the variable-rate mortgage loans, which have not been referenced in the agreement.

Whilst the CJEU reiterates the finding from the order in Gómez del Moral Guasch that the lack of transparency of a term does not render it, in itself, unfair, it would weigh in on the unfairness test (para 66). Further, the national court, when estimating whether the contract term introduces significant imbalance between parties' rights and obligations, has to look at what rules would apply in the absence of the agreement and assess to what extent the contractual provisions put the consumer at a detriment (Banco Primus - see our comment). With variable-rate mortgage loans this means comparing the interest rate to the statutory interest rate and the interest rates applied on the market at the date of conclusion of the agreement at issue... for a loan of a comparable sum and term (para 65).

UPDATED:

Readers interested in finding out more about the intricacies of the financial indexes used in Spain for calculating variable-rates in mortgage loan contracts, the legal value of circulars issued by the Bank of Spain, and the possible misconstruction of Spanish law by the CJEU - please check the comment of Prof. Ernesto Suárez from ESADE and UPF Law Schools in Spain.

Limits of unfair terms control, limits of harmonisation: CJEU in First Bank SA (C-593/22)

Is unfairness, like beauty, foremost in the eyes of the beholder('s Member State)?

Yesterday, the Court of Justice has decides a seemingly obvious case the systematic implications of which may be a bit more serious than they seem at first glance. In First Bank SA, the Court was asked to interpret the scope of application of Directive 93/13, in particular to the extent that its Article 1(2) declares that

"contractual terms which reflect mandatory statutory or regulatory provisions and the provisions or principles of international conventions to which the Member States or the Community are party, particularly in the transport area, shall not be subject to the provisions of this Directive." 

This is a more radical exclusion than the one dictated by Article 4 for core terms, which was inserted at a relatively late stage in the legislative process and in any event requires terms to be drafted in plain and intelligible language, in accordance with the same Directive's Article 5. 

The justification for this exclusion is a presumption in favour of national laws - the latter being trusted to have established a fair balance between the rights and duties of the parties to the contract. The exclusion of Article 1(2), in this sense, is an absolute presumption: As the Court has put it, the idea of a national fair balance is not a requirement for the exclusion, but just a rationale. Whether the legislatively established balance is fair or not does not really matter. 

Against this background, some Romanian customers tried to challenge terms in credit contracts that put all the risk for currency exchange fluctuations onto them. It appeared plausible, however, to claim that such terms were in line with a general provision in Romanian contract law expressing the principle of "monetary nominalism", namely the idea that the debtor always owes the amounts agreed in the given currency and not a specific value in terms of purchase power. 

Two questions were raised in this context: 1) whether the exception only applies when the contract terms literally reproduce legal provisions; 2) whether it matters, to the ends of applying the exception, that the consumer may have not understood that the term at stake was in fact equivalent to valid provisions of national law. 

Both questions were answered rather swiftly and without intervention of an AG. As to the first, the Court [see para 25] concluded that national courts must ascertain whether the clause at stake incorporates the same "normative content" as the corresponding provisions of national law; in that case, the terms can be assumed to "reflect" legal provisions, with no need for literal reproduction. 

Only slightly more interestingly, the Court dismissed the idea that understanding by the consumer may matter: relying on an unpublished order [see para 32], the Court clarifies that it has already once established that the professional's compliance with its disclosure and transparency obligations is not relevant to the ends of Article 1(2). This is ultimately the necessary implication of assuming that the exclusion must be interpreted objectively and not on the basis of parties' understandings. 

All in all, this is hardly a surprising decision. However, from a consistency perspective, it brings to the fore interesting questions concerning the tensions implied in the Directive's original choices - isn't it a problem [that this not-all-too-restrictive interpretation of] Article 1(2) further undermines the harmonising effects of the Directive? How does it fit with the role of transparency in respect of core terms? Is it acceptable that obviously extractive interest fluctuation clauses are assessed differently in the different Member States? 

In other words, if the Directive trusts both states (in respect of national rules) and private autonomy (in respect of core terms and price-service ration), why does the subjective understanding of the consumer not play even the least role in (applying) the exception? It looks like the stark reliance on the exemption rules as entirely formalistically interpreted and objectively applied reinforces the differences between Member States and takes the position of individual contractual parties in very little consideration. The reader will point to the obviously different formulation of the two provisions in Article 1(2) and 4 explained at the beginning of this post; whether a different formulation in the future would be acceptable to Member States and not end up diluting rather than improving consumer protection, in all honesty, is a prediction we will have to leave for another day.

PS In case you are wondering, immediate inspiration for today's title was provided by a paper written by my colleague Chantal Mak in re Gutierrez Naranjo a few years ago - also on dynamics of EU and national unfair terms rules. You find it on SSRN.

Suspending payments of monthly loan instalments for consumers awaiting finding of unfairness - CJEU in Getin Noble Bank (C-287/22)

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On June 15th, aside the Bank M judgment (see our previous comment here), the CJEU addressed Polish law implementing the Unfair Contract Terms Directive also in the case Getin Noble Bank (C-287/22). Also in this judgment the CJEU chose for a consumer-friendly interpretation of the UCTD, precluding national courts from dismissing a consumer's application for the grant of interim measures (namely, a suspension of the payment of the monthly instalments due under a loan agreement) when a decision on the invalidity of the loan agreement, due to unfairness of its terms, is pending. Such interim measures should be granted by national courts, if this is necessary to ensure 'the full effectiveness' of the invalidity decision. 

Polish consumers in the given case claimed unfairness of terms in a loan agreement converting the loan amount into Swiss francs at the purchase rate fixed by the bank, with monthly instalments repayable in Polish zlotys at the Swiss francs sale rate, also unilaterally fixed by the bank. What interests us, and the courts, however, is that in their claim they asked for the following interim measures being granted: 1) suspension of the obligation to pay monthly instalments until the final judicial decision; 2) prohibiting the bank to issue consumers with a notice of termination; 3) prohibiting the bank to publish any information that the applicants are in default on their loan payments during this time. The first sought measure could help with the improvement of the financial situation of consumers, who are likely to await the first court's decision for min of 2-3 years (para 53). The second measure would prevent the bank from taking punitive measure as a result of consumers' pursuing their claims. The third measure would not allow the bank to tarnish consumers' credit score.

Polish law allows to grant interim measures only when there is a 'legitimate interest' of the applicants in them, which amounts to showing that "the failure to grant interim measures would prevent or seriously impede the enforcement of the forthcoming judgment in the main proceedings or the achievement of the purpose of the proceedings in that case" (para 19). Polish courts have so far not been willing to recognise the existence of such an interest in Swiss francs loan cases, due to either of the following: 1) invalidity of a contract as a result of unfairness not leading to enforcement; 2) the need for interim measures to help avoid consumer harm, which could e.g. occur if the bank was in a poor financial situation; 3) consumers possibly being required to repay the loan capital when unfairness and invalidity is declared, which means that their continued payment of monthly instalments would be beneficial to them, limiting the final repayment amount (para 20).

The CJEU first refers to the past judgment in Aziz case (see our comment on it here), recalling that it already precluded national law from not allowing to grant interim measures to consumers awaiting a declaration of unfairness (and its consequences), when interim measures were necessary to ensure that the final national judgment is effective in protecting consumers (para 41). In Aziz case the interim measures were related to staying enforcement proceedings when consumers defaulted on paying their mortgages, which in Spain led to accelerated proceedings of mortgage enforcement.

Further, it reminds that in the case Fernández Oliva and Others (joined cases C-568/14-570/14 - see here) it considered granting of interim measures as necessary to protect consumers from the risk of paying higher than necessary monthly instalments during lengthy judicial proceedings (para 42).

As, pursuant to Polish law, consumers may only claim repayment of monthly instalments already paid at the moment of bringing an unfairness claim to court, this means that without the interim measures, they would need to bring a second claim to courts after succeeding in the first one (para 22). They would also be obliged to pay legal costs for the second time (para 50). The CJEU highlights that such an application of Polish law would make at least partially the forthcoming final decision ineffective, as it would "not have the effect of restoring the legal and factual situation of that consumer in the absence of that unfair term" (para 48).

Importantly, it is up to national courts to consider how likely the finding of unfairness is in a given case. If there is sufficient evidence of unfair terms, the removal of which could lead to invalidating the contract, plus there is evidence that consumers are likely to overpay banks without courts granting interim measures - the latter should be awarded (para 59).

Upon unfairness of mortgages, banks may suffer financially - CJEU in Bank M. (C-520/21)

Last Thursday the CJEU issued a much-awaited judgment in the Polish case Bank M. (C-520/21), another case dealing with the fallout of mortgage loans concluded by consumers in a foreign currency. This time the questions asked by the national court pertained to the consequences for the parties of the court declaring the whole contract null and void. When a mortgage loan contract is invalidated, it is clear to the referring court that that parties need to reimburse the sums payment (the bank should receive the loan principal, consumers - monthly payments, fees, commissions and insurance premium). But could other sums be claimed, mainly on the basis of unjust enrichment under national law? For example, could consumers claim from banks interest on the amounts they overpaid over the years, due to changes to currency exchange rates? Could banks in turn claim from consumers interest on the sum of money they were not able to otherwise invest as they provided it as a loan principal? Polish banks have indeed threatened consumers pursuing the unfairness of mortgage loan terms by asserting claims against consumers in such cases on the basis of the non-contractual use of the capital (Banki pozywaja frankowiczow, by przerwac bieg przedawnienia). 

The court relies heavily in its opening statement on the previous judgment in the case Gutiérrez Naranjo and Others (see our comment here), recalling the importance of the restitutory effect of the declaration of unfairness: Consumers must be brought back to the position (legal and factual), they would have been in if the unfair term had not existed (paras 61, 65). The second important function of the consumer protection against unfairness is to deter sellers and service providers from imposing unfair terms on consumers. National law then, in order to be compliant with the UCTD, needs to facilitate restoration of consumers to the position they would have been in if not for unfairness, as well as needs not to undermine the deterrent effect of the UCTD (para 68).

In this light, if national laws facilitate consumers claiming additional compensation from banks than the reimbursement of the monthly sums paid etc, this should not undermine the objectives mentioned above. To the contrary, such legal options may enhance the deterrent effect of the consumer protection framework against unfairness (paras 69-71). The Court recalls the need to adhere to the principle of proportionality though, which means that national courts should assess whether consumer claims do not go beyond what is necessary to achieve the above-mentioned objectives (para 73).

The same reasoning could not be applied to assess the compliance of national laws allowing banks to claim further compensation from consumers than the reimbursement of the loan principal. Such a legal option would undermine the deterrent effect of the protective framework (para 76). It could also discourage consumers from seeking to complain against unfair terms, as it may be more economically beneficial to continue with the performance of a contract containing unfair terms (para 79). The Court is not dissuaded from concluding this by arguments raised by banks indicating the fragility of the financial market at the moment, as well as claims that consumers will be receiving their loans 'free of charge' (para 80). The Court falls back on the principle nemo auditur turpitudinem allegans (no one may rely on their own wrongdoing). As banks chose to use unfair terms in their mortgage loan contracts, they may not now complain that they will lose their profits (para 82).

This judgment follows previously issued AG Collins' opinion. It has been rejoiced in Poland, where banks started counter-suing consumers not only for the return of the loan principal but also for the compensation for its use during the loan period, before the mortgage contract is annulled. Banks generally estimated such compensation to equal at least 50% of the loan principal, which would seriously impede any consumers' winning claim as to unfair mortgage loan terms. Now, if only the Polish courts were given additional resources to actually be able to handle all these cases, so that consumers could find their redress in a timely fashion.

Financial benefits from a loyalty programme cannot deprive one of consumer status - case C-455/21, Lyoness Europe

Yesterday we reported on a case discussing the consumer notion under the Unfair Contract Terms Directive in the context of dual purpose contracts. Interestingly enough, this was not the only ruling on Article 2(b) UCTD issued by the Court on that day. Another one is C-455/21, Lyoness Europe, in which the Court similarly engaged with the consumer notion, although in somewhat different circumstances.

Facts of the case

  Image by storyset on Freepik

The dispute related to a membership programme offered by Lyoness Europe (currently myWorld), making it possible for the customers to purchase goods and services from collaborating traders on favourable conditions. One of the customers - a natural person working as a mechanical engineer - believed that the contract contained unfair terms and decided to sue the provider. Among others, the claimant questioned the lawfulness of a term designating Swiss law as the applicable law.

Easy case: membership programme

The Court focused on the easier problem arising in the dispute, namely whether a natural person who becomes a member of a scheme allowing certain financial benefits in connection with the purchase of goods and services is a 'consumer' within the meaning of Article 2(b) UCTD. Not surprisingly, the Court concluded that such a person does qualify as a consumer where he or she is acting for purposes which are outside his or her trade, business or profession. Like in case  C‑570/21, YYY, on which we reported yesterday, the Court emphasised the nature of the service covered by the contract, which may show the purpose for which that service is being acquired (para. 49). In this context, the Court concluded that a natural person who seeks to benefit from advantageous conditions in the context of the purchase of goods and services for non-commercial purposes cannot lose the status of 'consumer' by the mere fact that he or she derives financial benefits (refunds on purchases, commissions or other promotional advantages) from the participation in the scheme. Joining a club to get deals for your purchases does not make you a trader.

Unanswered questions: dual purpose contracts

The referring court also explicitly asked about the application of Article 2(b) UCTD to dual purpose contracts. The Court considered those questions inadmissible, stating that there was nothing in the preliminary reference to suggest that the case indeed involved such a contract. The conclusion seems justified. But the question also sheds light on the additional dimension of the differentiated interpretation of the consumer notion in contract law and private international law. As we know from case C-191/15, VKI vs. Amazon, a choice of law clause included in standard terms can be considered unfair if it leads the consumer into error by giving him the impression that only the law of that Member State applies to the contract, without informing the consumer that under Article 6(2) of the Rome I Regulation he or she also enjoys the protection of the mandatory provisions of the law that would be applicable in the absence of that term (para. 71). In case of dual purpose contracts, however, the very same person may qualify as a consumer under the UCTD and not qualify as such under Rome I Regulation. How then should a perfectly transparent term be formulated?

CJEU confirms: consumer notions in contract law and private international law are not equivalent

Earlier today the Court of Justice issued the judgment in case C‑570/21, YYY. (Notion de consommateur). The case concerned, once again, the notion of the consumer under Directive 93/13/EEC on unfair terms in consumer contracts (UCTD). The Court has already dealt with similar problems in its earlier case law, recently e.g. in case C-485/21, S.V. (Immeuble en copropriété). The judgment confirmed that the notion of the consumer in mixed-purpose contracts under UCTD should be understood broadly. The ruling does not come as a surprise; what is nevertheless noteworthy is an explicit confirmation that the notion of the consumer in contract law is different from that in private international law. The Court, moreover, provided additional guidance on the interpretation of consumer notion in joint credit agreements.

Facts of the case

The case involved a credit contract concluded between a bank and two married debtors, one of whom self-employed. The loan amount was devoted partly to the professional purposes and partly to the private purposes. Specifically, 35% of the loan was used to make outstanding payments for the company of one of the debtors, while the remaining 65% was used to used to finance renovation works in the debtors' house. Against this background, a question was raised whether the contract qualified as a business-to-consumer contract and fell within the scope of the UCTD.

"Not predominant" vs. "negligible" purpose

The referring court requested the interpretation of Article 2(b) UCTD, which defines the notion of the consumer, explicitly enquiring about the relevance of the Gruber case law in that context. To recall, the Court established in Gruber that a person who concludes a contract for goods intended for purposes which are in part within and in part outside his or her trade or profession may not rely on the special rules of jurisdiction, unless the trade or professional purpose is "so limited as to be negligible" in the overall context of the supply. This seemed to be at odds with the wording on mixed-purpose contacts found, among others, in Directive 2011/83/EU on consumer rights (CRD). Specifically, pursuant to recital 17 of the CRD where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is "so limited as not to be predominant" in the overall context of the contract, that person should also be considered as a consumer.

As mentioned, already the previous judgments of the Court suggested that the Gruber test cannot be applied more broadly to consumer law, but is limited to the specific context of applicable law and jurisdiction. The Court has now made this distinction explicit. It drew attention to a close connection between the UCTD and the CRD, recently strengthened via the Omnibus Directive (para. 43). The Court emphasised that both directives follow the same main objective, namely to provide for a high level of consumer protection (para. 42). It also observed that a wording similar to that in recital 17 CRD can also be found in the ADR Directive and the ODR Regulation, suggesting that the legislator intended such a broader reading to have a horizontal nature (para. 45). Accordingly, the notion of the consumer under UCTD must be understood as also covering a person who concludes a dual purpose contract if the trade purpose is so limited as not to be predominant in the overall context of the contract.

The more restrictive reading of the consumer notion in mixed-purpose contracts continues to be relevant in the domain of private international law. Here, as the Court noted, additional objectives must be considered, namely the legal certainty and predictability of the jurisdiction. The more recent Schrems judgment does not undermine this reading (para. 47). 

Joint credit agreements

Having clarified the outer boundaries of the consumer concept, the Court went on to provide more specific guidelines on its interpretation in the case at hand. Firstly, it stressed that the referring court should take all circumstances of the case into account, including the nature of the product or the service. In case of mixed-purpose credit contracts, the Court indicated that the scope of professional and personal components of the contract and the dominant purpose of the contract should be considered. The Court then went on to formulate more specific criteria, noting that they are neither exhaustive nor exclusive (para. 58). In particular, the quantitative breakdown of the borrowed sum between the two respective purposes may be an important criterion. However, also qualitative criteria may turn out to be relevant, e.g. the fact that only one of a larger number of debtors pursues a professional activity or that the granting of a loan, initially intended solely for private purposes, was made conditional upon the partial allocation of the borrowed amount to the repayment of trade-related debts.

Overall, the judgment in case C‑570/21, YYY, is a welcome ruling, dispelling some persisting doubts about the reading of consumer notion in different legal acts. Nonetheless, the differentiated interpretation may, in itself, pose practical challenges, as the second judgment issued on the same day illustrates.

The (un)fairness of fees - the CJEU in C-565/21 CaixaBank S.A.

On the 16th of March 2023, the CJEU delivered another judgment on the interpretation of Directive 1993/13/EC on Unfair Contract Terms (UCTD), C-565/21 Caixabank S.A v X. As many before, this judgment also concerned mortgage credit.

 

This case is about the validity of a so-called 'arrangement fee' that was charged to the consumer in the amount of EUR 845. According to the applicable Spanish law, an arrangement fee meant all expenses related to the examination of the loan application, the granting, and processing of the mortgage loan, or other similar expenses that are necessarily associated with the loan application. The law required the fee to be a single sum for all associated expenses.

 

It appears that this lex specialis providing for arrangement fees caused uncertainty in terms of how it affects the horizontal, lex generalis rules of the UCTD, and whether the practice of Spanish courts of giving priority to lex specialis in ruling on the validity of arrangement fees is compliant with EU law.7

 

The CJEU took this opportunity to clarify the question and reinforce its earlier by now established case law and to provide novel addition to these by ruling on the interpretation of Articles 4(2), 5 and 3(1) of the UCTD.

 

Is the assessment of the fairness of the arrangement fee excluded based on Article 4(2) of the UCTD?

 

With its first question the referring Spanish Supreme Court essentially asked the CJEU to clarify the scope of the ‘main subject matter’ exception from the test of fairness. As we know, if the term amounts to the ‘main subject matter of the contract’ and is transparent it cannot be assessed for its fairness based on Article 4(2) of the UCTD.

 

The starting premise of the referring court was that the arrangement fee constitutes, along with the compensatory interest, the price of the mortgage loan and is therefore within the concept of ‘the main subject matter of the contract’ and exempted from the scrutiny of the test of fairness. Disregarding the somewhat odd approach to consider the arrangement fee a possible main subject matter of the contract when it is more likely to be the price and therefore fall under the second limb of Article 4(2), the ‘adequacy of the price’ exception, the CJEU gave a useful interpretation of the exception.

 

The CJEU referred to its established case-law, and noted that only those terms are exempted from the test of fairness as the main subject matter of the contract that define the essential obligations of the contract, which in the case of a loan contract would be the amount lent and repaid and the interest. Following this approach, the CJEU noted that in Caixabank and Banco Bilbao Vizcaya Argentaria (C‑224/19 and C‑259/19), the CJEU already ruled that the (Spanish) arrangement fee cannot be considered to be an essential obligation of a mortgage loan agreement only because it is included in the total cost of the loan.

 

The CJEU then highlighted the need to interpret the scope of the Article 4(2) exception restrictively and concluded that the obligation to pay for such services cannot be regarded as forming part of the main obligations arising from a credit agreement. It would be contrary to strict interpretation to include in the concept of ‘the main subject matter of the contract’ all services which are merely associated with the main subject matter itself and are therefore ancillary. The CJEU, therefore, emphasised once again, the main subject matter of the contract must be the main obligation of the contract, which in this case, would be the amount of the loan, as the main obligation of the lender, and the payment of the interest, as the main obligation of the borrower.

What is the meaning and scope of transparency under Articles 4(2) and 5 of the UCTD?

 

The CJEU ruled that whether the term is in plain and intelligible language under Article 5, the national court, taking into account all the relevant facts of the case, should ascertain whether the borrower had been placed in a position to assess the economic consequences for him or her, to understand the nature of the services provided in return for the costs provided for by that term and to ascertain that there is no overlap between the various costs provided for in the contract or between the services for which those costs are paid.

 

The emphasis above is the assessment based on the concrete facts of the case. An arrangement fee should not be regarded as automatically satisfying the transparency requirement arising from both Article 4(2) and Article 5 if the term satisfies the requirements imposed by national legislation. The CJEU emphasized, transparency should be assessed in the light of all the relevant facts, whether the borrower was indeed in a position to assess the economic consequences for him or her which derive from that term, to understand the nature of the services supplied in return for the costs provided for by that term, and to ascertain that there is no overlap between the various costs for which the agreement provides or between the services for which those costs are paid.

 

Very helpfully, the CJEU provided a list of circumstances that the national courts should, may, or should not consider in ruling on transparency which we summarise and categorise below:

 

Information/circumstances that should be considered:  

 

• the  wording of the term,
•  the information that the financial institution provided to the borrower, including mandatory information required by national law,
• advertising in relation to the type of agreement entered into, by taking into account the level of attention which can be expected of an average consumer who is reasonably well informed and reasonably observant and circumspect.
•  promotional material provided by a financial institution on the type of agreement entered into.

Information/circumstances that may be taken into account:

 

•     Information that the financial institution is required to provide to the potential borrower in accordance with national legislation; in general, the information that the financial institution has given to that borrower in the negotiation of an agreement on the contractual terms and the consequences of entering into that agreement
•    Attention which the average consumer pays to a term relating to an arrangement fee, In accordance with the case-law, account must be taken, in the context of that assessment, of the level of attention which can be expected of an average consumer who is reasonably well informed and reasonably observant and circumspect.

 Information/circumstances that should not be considered: 

•         The onsumers’ general knowledge of a term unconnected to the way in which such a term is drafted in the context of a particular agreement. The fact that such a term is well known is not a factor that may be taken into consideration in assessing whether that term is plain and intelligible,
•         The wording, location, and structure of a term justify the finding that it is an essential element of the agreement (at least in this case because it leads to an incorrect assumption that it is an essential term). 

Does the arrangement fee cause a ‘significant imbalance’ under Article 3(1) UCTD?

 

The final question to the CJEU was whether the arrangement fee could be considered under Article 3(1) as directly affecting the contractual balance in the parties’ rights and duties to the detriment of the consumer.

 

Referring to Kiss and CIB Bank (C‑621/17), the CJEU clarified that unless the services provided in return (the arrangement fee in this case) do not reasonably relate to services provided in connection with the management or disbursement of the loan, or the amounts charged to the consumer in respect of those costs and that fees are disproportionate to the amount of the loan, in principle, it would not cause significant imbalance. However, this would have to be verified by the competent court in each individual case based on the facts of the case.

 

On the same grounds, a contractual term governed by national law that establishes an arrangement fee to remunerate services relating to the examination, constitution, and personalised processing of an application for a mortgage loan, does not appear, subject to verification by the court having jurisdiction, capable of adversely affecting the legal position of the consumer, unless the services provided in return do not reasonably fall within the scope of the services described above or the amount charged to the consumer in respect of that fee is disproportionate to the amount of the loan.

Finally, the CJEU emphasised that national court practice that would simply declare that a term is not unfair because it is based on the applicable national law would be contrary to EU law and the UCTD, as it would prevent national courts to carry out, including of their own motion, an examination of the potential unfairness of the terms concerned in accordance with that provision and, consequently, would fail to ensure the full effectiveness of the UCTD. This final point, the point that caused uncertainty in Spanish judicial practice, is somewhat surprising. First of all,  it seems to go against one of the founding principles of law according to which special rules prevail over general rules (lex specialis derogat legi generali). Secondly, it would have been useful to consider the ‘mandatory terms’ exception here under Article 1(2) UCTD. 

No colouring outside the lines for national courts (exchange rate risk in consumer loan contracts) - CJEU in AxFina Hungary (C-705/21)

On April 27th the CJEU issued another judgment in the saga of consumer loan contracts denominated in a foreign currency, AxFina Hungary (C-705/21). It discussed further consequences, pursuant to Articles 6 and 7 UCTD, of finding unfair such terms that place the exchange risk on the consumer, when the loan is denominated in a foreign currency, but consumers repay it in the national currency.

This case concerned a smaller consumer law (ca 7k Euro) taken out to purchase a vehicle and repayable over 10 years. The loan was denominated in Swiss francs and repayable in Hungarian forint. Hungarian court declared invalidity of this loan contract on the basis of the unfairness of the term imposing the exchange rate risk on consumers. On appeal the referral was made to assess the compliance with EU consumer law of current Hungarian practices regarding unfair terms in consumer loan contracts. Namely, as paras 17-19 explains, following Hungarian Supreme Court's non-binding position, Hungarian case law tended to declare consumer loan contracts with unfair terms on exchange rate risk 'temporarily applicable' - until the date the judgment was issued. This means that the contract is terminated for the future, but not seen as having been invalid in the past. When removing 'the cause of the invalidity' courts would either convert the loan into Hungarian forints (removing entire exchange risk) or set a ceiling on the exchange rate risk (removing part of exchange risk). 

Declaring loan contracts valid and amending their terms: Not a default

The CJEU is clear in condemning Hungarian case law practices: If a term places exchange rate risk on consumers and as a result is declared unfair, which leads to invalidity of a loan contract, this contract cannot then be declared valid and have its terms amended by courts. It does not matter whether the amendment would change the currency of the loan or of the interest rate or set the ceiling on the exchange rate (para 50). The court recalls the previously raised arguments on the need to assure the dissuasive effect of the UCTD by not allowing national courts to modify unfair contract terms (paras 38-41). The previously adopted exception, for when invalidating a contract due to unfairness would expose consumers to particularly detrimental consequences, and where there is a possibility to replace the unfair term with a supplementary provision of national law, still stands (para 42). If such supplementary provisions do not exist, national courts could still help consumers facing detrimental consequences of contract's invalidity, e.g. by inviting parties to negotiate new terms, within the framework set by national courts (para 46) or by ordering repayment of sums wrongly received by the lender on the basis of the unfair term as unjust enrichment (para 48). But national courts, in their efforts to protect consumers from detrimental consequences, cannot go beyond what is 'strictly necessary' to restore contractual balance.

This is perhaps just a reiteration of the previously declared rules (mainly in Lombard Lizing and Banca B, see here on the latter), but it is a needed repetition. This in light of the tendency of national courts to still try to colour outside the lines set by the CJEU in cases related to consumer loan contracts denominated in foreign currencies.

Substituting unfair exchange rate terms with supplementary provisions

Further, the CJEU reiterated Dziubak (see here) and stressed the narrow scope for what constitutes supplementary provisions, with which national courts may replace unfair exchange rate terms in consumer loan contracts. This substitution may only happen in exceptional cases, i.e. when consumers face 'particularly unfavourable consequences' (para 52). Further, such provisions cannot be of a general nature (para 55), as they had to be adopted to specifically address the need to restore the balance between the parties (para 54). This also means that  such supplementary provisions need to 'usefully replace the same term by a mere substitution by the national court which does not require action on the part of that court that would amount to revising the content of an unfair term in that contract' (para 56).

Going in blind - Consequences of no opportunity to read insurance terms: CJEU in Occidental (C-263/22)

Last week, on 20 April, the CJEU issued a judgment in the case Occidental - Companhia Portuguesa de Seguros de Vida (C-263/22) interpreting further provisions of Articles 3-6 of the Unfair Contract Terms Directive.

By Ryoji Iwata on Unsplash 

The case concerned a bank loan taken by a Portuguese couple, who joined a group insurance contract between the bank and Occidental, an insurance company. Occidental was to guarantee repayment in the event of the consumer's permanent incapacity. When consumer became permanently incapacitated, the insurer refused re-payment, invoking invalidity of the insurance contract due to incorrect and incomplete health declaration by consumer. The insurance contract also excluded from the cover any permanent incapacity resulting from illness that consumers suffered from prior to the contract's conclusion. Consumers claimed, however, that they were never informed about this exclusion clause and that they also did not provide their own health questionnaire to the insurer, as a bank employee completed it for them. 

Portuguese court struggled with two strands approach to the above situation in Portuguese case law, either recognising the insurers' duty to notify policy terms to policyholders or not, and the compliance of the second approach with the UCTD.

Opportunity to read

The first and second questions are interpreted as inquiring about the scope of obligation to create an opportunity to read terms and conditions for consumers. The CJEU reiterates the compliance rules with the principle of transparency, including the need to provide relevant information to consumers before the conclusion of the contract (para 27). Importantly, the CJEU draws attention the fact that with linked contracts (consumers concluding loan and insurance contracts simultaneously) consumers 'vigilance regarding the extent of the risks covered by that insurance contract' will not be the same as when they are concluding loan and insurance contracts separately (para 28). Consumers will need also to have access to all terms of a contract before its conclusion (para 29), regardless whether these are core contract terms (paras 30 and 31), incl. receiving information on 'the specific features of the arrangements for covering the loan repayments' in the event of permanent incapacity to work (para 28). After all, transparency means being able to evaluate economic consequences flowing from the concluded agreement.

To sum up, if consumers did not have access to full terms and conditions prior to concluding the contract, they could invoke UCTD protection against the trader/service provider. Further, the attention drawn by the CJEU to the increased need for transparency when linked contracts are concluded could result in service providers needing to re-evaluate their disclosures in such circumstances.

Consequences of lack of opportunity to read insurance terms on insurance cover

Since consumers had no chance to read the terms of the insurance cover on possible exclusions from the cover's scope, this lack of transparency would weigh in on the evaluation of unfairness (paras 40-41). The CJEU proceeds to outline in details how national court should conduct the unfairness test, i.e. assessing good faith and checking for a significant imbalance in parties rights and obligations to the contract. Importantly, the CJEU draws a conclusion that '(...) by not allowing the consumer concerned to become acquainted, prior to the conclusion of that contract, with the information relating to those contractual terms and all the consequences of the conclusion of that contract, the seller or supplier places that risk, arising from any permanent incapacity, in whole or at least in part, on that consumer' (para 50). If, consequently, the national court would find that consumers would not accept these terms in individual negotiations, then the seller/supplier should be seen as acting not in good faith and the term as unfair (para 51). The term would then be void and not enforceable against consumers (paras 52-53). This legal status  of unfair terms could not be changed by national legislation regulating civil liability of insurers for failure to notify policyholders (para 53). Such a civil liability could be pursued separately by consumers (para 55).

To sum up, the fact that consumers had no opportunity to read the term does not lead to a consequence of that term being automatically void under EU consumer law. This circumstance weighs in though, rather heavily, on the unfairness test. Only when the term is declared unfair, it needs to be considered as void, with all the consequences attributable to this.