Early repayment and reduction in the total cost of mortgage loans C-76/22

Another interesting case tackled by the CJEU was C-76/22 QI v Santander Bank Polska S.A., focusing on Directive 2014/17/EC on Mortgage Credit (MCD) and the rules on the calculation of the reduction of the total cost of credit in case of early repayment. Although the judgment was delivered almost two years ago, it remains relevant as one of the few cases interpreting the MCD, and there has been no other case on the matter.

The consumer entered into a 36-month mortgage loan with the bank. However, the consumer fully repaid the loan within 19 months. At the time of granting the loan, the consumer paid a 2.5% commission on the amount borrowed, which was included in the total cost of credit. After full repayment, the consumer requested a refund of the portion of the commission paid corresponding to the remaining loan period (the period after full repayment). 

The bank claimed that the commission for granting the mortgage was a one-off payment and was therefore excluded from the obligation of refund, but even if it would be refundable, reimbursement should not be proportionate to the period covered by the early repayment in relation to the repayment duration initially agreed, but should be proportionate to the profit expected by the creditor.

Under scrutiny was Article 25(1) of MCD, according to which '[m]ember States shall ensure that the consumer has a right to discharge fully or partially his obligations under a credit agreement prior to the expiry of that agreement. In such cases, the consumer shall be entitled to a reduction in the total cost of the credit to the consumer, such reduction consisting of the interest and the costs for the remaining duration of the contract.

The CJEU was first asked to answer whether the one-off commission falls within the category of costs considered when calculating the reduction in the total cost of the mortgage credit. In answering the question, the decisive point for the CJEU was whether charges are regular payments and whether the amount of (one-off) payments is objectively linked to the duration of the contract. However, as the bank did not provide the relevant information to be able to answer the question, the CJEU reformulated the first legal question to: whether Article 25(1) MCD must be interpreted as meaning that, in the absence of information provided by the creditor enabling a national court to ascertain whether a commission charged when concluding a mortgage agreement falls within the category of costs that are independent of the duration of that agreement, that court must consider that such a commission is covered by the right to a reduction in the total cost of the credit referred to in that provision.

The CJEU noted that national courts must satify themselves that the costs imporsed by the consumer, irrespective of the duration of the credit agreement, do not objectively constitute remuneration of the creditor for temporary use of the capital which is the subject matter of that agreement or for services which, at the time of early repayment, had not yet been provided to the consumer (para. 33). Therefore, a national court cannot presume, solely on the basis that a charge was paid by the consumer in a single instalment when concluding the mortgage agreement, that that charge falls within the costs that are independent of the duration of the agreement, which therefore cannot result in a reduction in the total cost of the credit referred to in Article 25(1) (para. 34).

The CJEU ruled that in the absence of sufficient information, whether the costs are objectively linked to the duration of the contract or whether those costs are independent of that duration, and to ensure that the consumer is not adversely affected by that absence of information, the national court is required to find that the costs concerned are not independent of the duration of the contract and are, consequently, covered by the right to a reduction in the total cost of credit in Article 25(1) MCD, even if the costs were paid in a single instalment when the agreement was concluded.

By the second question, the CJEU was asked whether Article 25(1) requires a specific methodology for calculating the reduction in the total cost of credit.

The CJEU noted that there is nothing in the wording of the provision that would suggest that, and reiterated the purpose of Article 25(1), which guarantees that Member States will provide for the consumer's right to discharge fully or partially his or her obligations under a credit agreement prior to the expiry of that agreement. Secondly, in the event of early repayment, the consumer is entitled to a reduction in the total cost of the credit, which consists of the interest and the costs for the remaining duration of the contract. In this regard, Member States enjoy discretion, provided that the chosen methodology ensures a high level of consumer protection. 

The CJEU therefore ruled that there is no specific methodology for calculating the amount of the reduction in the total cost of credit referred to in Article 25(1).

This is an important judgment that sheds light on the way that the reduction in the total cost of credit in the event of early repayment should be calculated. It is also a warning to banks to be transparent about how their costs are calculated when communicating with all stakeholders, including courts. An interesting comparative point can be added: Article 29(1) of Directive 2023/2225 on Consumer Credit (CCD2) contains a similar provision that, in a way, seems to clarify the vagueness of the MCD and support the CJEU's position. According to Article 29(1) of CCD2, early repayment entitles consumers to a reduction in the total cost of the credit for the remaining duration of the contract. When calculating that reduction, all the costs imposed on the consumer by the creditor shall be taken into consideration.  The CCD2, therefore, refers to all costs, including all fees and commissions, regardless of how and when they were payable.

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.

The right of withdrawal, linked agreements and vehicle purchase contracts- the CJEU in C-143/23

On the 30th of October 2025, the CJEU delivered a judgment in the joined cases of consumers KI and FA against Mercedes-Benz Bank AG and Volkswagen Bank GmbH in C-143/23 , advancing the interpretation of Articles 10 and 14 of Directive 2008/48/EC on Consumer Credit.

 

The consumers entered into a credit agreement with their respective banks to purchase a motor vehicle for private use; where the car dealers from whom the vehicles were purchased acted as credit intermediaries and to whom the loans were paid in directly. The credit agreements did not inlcude the interest rate applicable to late payments at the time the agreement was concluded. Months and years after the contract had been concluded, the consumers notified their banks that they wished to withdraw from their credit agreements, arguing that the standard 14-day period did not begin to run due to omissions in the mandatory information included in their contracts. The referring Landgericht Ravensburg asked several questions to the CJEU.

 

 

The first question addressed by the CJEU was whether the consumers' right of withdrawal began to run despite the absence of mandatory information in their contract. According to Article 14(1)(b) of Directive 2008/48 the 14-day withdrawal period begins to run only on the day on which the information provided for in Article 10 has been received by the consumer, if that day is later than the day on which the credit agreement was concluded. Article 10(2)(l) provided that a credit agreement must state, in a clear and concise manner, the interest rate applicable to late payments, arrangements for its adjustment and any charges payable for default.

 

In its analysis, the CJEU emphasises the importance of mandatory information for consumers' informed decision-making, aimed at helping consumers in a weaker position vis-à-vis the bank. The CJEU then underlined the importance of informing consumers of the specific interest rate for late payment to enable consumers to be aware of the consequences of any late payment, information which is likely to influence not only the consumer’s decision to enter into the agreement, but also their ability to organise the repayment of the loan.

 

In view of the these reasons, the CJEU ruled that Article 10(2)(l) and Article 14(1)(b) of Directive 2008/48 must be interpreted as meaning that the withdrawal period provided for in Article 14(1) does not begin to run until the credit agreement does not specify, in the form of a specific percentage, the interest rate applicable in the event of late payment at the time of conclusion of the agreement, and until such information has been duly communicated to the consumer. With this, the CJEU confirmed its earlier position in C-33/20 (see our analysis here).

 

 

The second question tackled by the CJEU is interesting. The referring court asked directly whether the consumers’ potential intention to abuse their right can be considered here, in particular, that the consumer continues to use the vehicle until the national courts have ruled on the validity of the withdrawal and that the consumer refuses to pay compensation for the loss of value of that vehicle. The CJEU emphasised that a general legal principle is that EU law cannot be relied on for abusive or fraudulent ends. However, in the particular situation, the creditor cannot claim that the exercise of the right of withdrawal is unfair, as the withdrawal period has not, in such a case, begun to run. Under the circumstances, the credit cannot reply on the consumer’s improper exercise of the right of withdrawal provided for in Article 14(1).

 

The third question was what compensation should be provided to the creditor for the use of the vehicle. The CJEU referred to the 14th recital of the Directive, which stated that it was for the Member States to determine the conditions and arrangements following exercise of the right of withdrawal. Directive 2008/48 therefore grants Member States a margin of discretion leaving them to regulate matters relating to the return of the goods financed by the credit, which must follow the principle of effectiveness requiring that national provisions governing the consequences of the exercise of the right of withdrawal do not undermine the effectiveness and efficiency of that right to such an extent that it becomes impossible or excessively difficult to practice to exercise the right.

 

The CJEU, however, emphasised that compensation must be proportionate to the vehicle’s depreciation and its condition at the time of its return. Subject to the verifications to be carried out by the referring court, the CJEU was of the opinion that a method of calculation based solely on the difference in price between the purchase and resale of the vehicle, which includes factors unrelated to the use of that vehicle, such as commercial margins and resale costs – determined unilaterally by the car dealer – as well as value added tax, does not allow for the assessment of the depreciation of that vehicle resulting from its use by the consumer. In particular, if these circumstances are considered regardless of whether the vehicle has not been registered or used before the right of withdrawal is exercised. The CJEU concludes that this method, therefore, appears to impose on the consumer a burden resulting exclusively from the exercise of his or her right of withdrawal, and is likely to result in compensation that is disproportionate to the purchase price of that vehicle, making the exercise of the right of withdrawal impossible or excessively difficult to use in practice.

 

The CJEU ruled that Article 14(1) of Directive 2008/48 must be interpreted as precluding national case-law to calculate the amount of compensation for loss of value owed by consumer to the creditor by deducting from the sale price charged by the dealer at the time of the vehicle’s purchase the purchase price paid by the dealer at the time of the return of that vehicle, provided that that the method of calculation includes factors unrelated to the consumer’s use of that vehicle.

 

Fourth, the CJEU also addressed the question of payment of the interest for the credit agreement, ruling that Article 14(1) of Directive 2008/48 must be interpreted as not precluding national legislation under which a consumer who, after withdrawing from a consumer credit agreement linked to a vehicle purchase agreement, is required to pay the interest provided for in that first agreement for the period between the payment of the loan funds to the seller of the financed vehicle and the date of return of the vehicle to the creditor or seller.

 

Finally, the CJEU explicitly confirmed that Directive 2008/48 must be interpreted as not harmonising completely the rules relating to the consequences of the consumer’s exercise of his or her right of withdrawal from a credit agreement linked to a vehicle purchase agreement.

On the assignability of consumer claims under credit contracts: CJEU in Zwrotybankowe.pl (C‑80/24)

As consumer law remains under-enforced, it becomes all too common for consumers to assign their claims to third-party claim management companies, which typically operate on a contingency basis and take a percentage of the amounts successfully recovered. In Case C‑80/24, the consumer assigned their claim against a bank to Zwrotybankowe.pl, one such claim management company, which would retain 50% of the recovered amounts as remuneration. The assigned claim arose under Art. 30(1) of the Polish Law on Consumer Credit, which implements Art. 23 of the Consumer Credit Directive 2008 and imposes a penalty for the bank’s failure to comply with information obligations. In a proceeding brought by Zwrotybankowe.pl against the creditor bank, questions arose as to the assignability of the consumer claim in question and the court’s duty to assess the assignment agreement ex officio under the Unfair Terms Directive.

The first question concerns whether the Consumer Credit Directive precludes the assignment of consumer claims thereunder. This is because Art. 22(2) of said Directive prohibits the consumer from waiving their rights under it. A broad interpretation of this provision could suggest that consumers cannot assign claims arising under the Directive to third-party companies that make a profit from these legitimate claims (paras 13-14). However, the CJEU rejected such an interpretation. In particular, it drew an analogy with its reasoning in Case C‑11/23 concerning Art. 15 of Regulation (EC) No 261/2004, which similarly provides an ‘exclusion of waiver’. In that case, the airline’s general conditions included a prohibition of the transfer of passenger rights, in particular the right to compensation. The Court disallowed such a prohibition, in order ‘to ensure a high level of protection for air passengers and to enable [consumers] effectively to exercise their rights’, including ‘the freedom to choose the most effective way in which to defend his or her right’, such as ‘to transfer his or her claim to a third party in order to spare him- or herself difficulties and costs that might deter him or her from taking steps personally in relation to that carrier with the prospect of a limited financial return’ (para 27). Based on an analogous reasoning rooted in the rationale of weaker party protection, the Court held that Art. 22(2) of the Consumer Credit Directive likewise does not preclude the assignment of consumer claims arising under the Directive.

The second question goes on to ask: if the claim is assignable, should courts assess the unfairness of the assignment agreement ex officio – when the dispute before them arises from a different contract, namely the credit agreement? Recalling its case law on ex officio review under the Unfair Terms Directive, the Court confirmed that such a duty is limited to ‘the subject matter of the dispute’ (para 38). In this case, the assignment agreement ‘does not come within the limits of the subject matter of the dispute before it’ and therefore falls outside the ex officio review obligation under EU law (para 40). Moreover, since the consumer was not a party to the proceedings, the imbalance between a consumer and a trader, which justifies ex officio intervention, was also absent (paras 41-43). Accordingly, the Court concluded that the Unfair Terms Directive does not require national courts to assess the assignment agreement ex officio in such circumstances. Finally, the Court added that, where national law does allow such an ex officio review, the principle of effectiveness should serve to safeguard consumers’ procedural rights (para 46).

The reasoning in Zwrotybankowe.pl seems to give away a rather permissive stance towards third-party enforcement of consumer claims. Given that many instruments within the EU consumer acquis contain comparable prohibitions on waiver, one may ask whether the Court’s analogy extends to those regimes as well. Sure, consumers should have the freedom to spare themselves from the ‘difficulties and costs’ of private enforcement, but how much should they pay for such convenience? And if these ‘difficulties and costs’ stem from a systematic failure in consumer enforcement, is the privatisation of enforcement – and the shifting of its costs to consumers whose rights have been infringed in the first place – really the right call?

On the Transparency Requirements of Arrangement Fees – CJEU in Justa v Banco Bilbao Vizcaya Argentaria SA (Case C-39/24)

Consolidating Caixabank SA (C‑224/19) and CaixaBank SA (C‑565/21) in Case C-39/2024 of 30 April 2025, the Court of Justice (CJEU) ruled on the transparency of arrangement fees and further clarified the threshold for meeting its requirements. 

Facts of the case

In November 2005, Just and Banco Bilbao Vizcaya Argentaria concluded a loan agreement secured by a mortgage. According to the contract, upon signing the agreement, Justa had to pay an arrangement fee equal to 0.25% of the capital loan. Justa brought an action before the Court of First Instance of Ceuta against Banco Bilbao seeking a declaration that the term establishing the arrangement fee was unfair. 

Question referred

The Court of First Instance of Ceuta referred two questions, one of which is admissible. The second, regarding the application of Directive 2014/17/EU is inapplicable ratione temporis.

By the admissible question, the referring court is asking whether Article 4(2) of Directive 93/13/EEC on Unfair Terms in Consumer Contracts (hereinafter, UCTD) must be interpreted as precluding the case law of the Tribunal Supremo (Supreme Court) which considers the term imposing an arrangement fee to remunerate services ‘connected with the examination, granting or processing of the mortgage loan’, to be transparent without the term specifying the services supplied in exchange for the fee or the time needed to perform them (para 28). 

Ruling

First, the CJEU observes that a term establishing an arrangement fee cannot be considered as pertaining to the main subject matter of the contract. The essential obligations of a credit contract are in fact that the lender ‘undertakes (…) to make available to the borrower a certain sum of money and that the latter undertakes (…) to repay that sum’ (para 31). With this, the CJEU further consolidates its ruling in Caixabank and Banco Bilbao Vizcaya Argentaria (C-224/19 and C-259/19, EU:C:2020:578, para 64). 

Irrespective, Article 5 of the UCTD imposes the same requirement for transparency for contractual terms in writing, which, as per that provision, must ‘always’ be written in plain and intelligible language. As already noted in 2023 in Caixabank (Loan arrangement fees), C-565/21, the requirement for transparency of Article 4(2) has the same scope as the requirement laid down in Article 5. Therefore, the question of the referring court must be reformulated with reference to Article 5 instead of Article 4(2). 

The CJEU holds that the requirement should not be understood as only demanding that the terms are formally and grammatically intelligible. The transparency of the terms must be understood broadly, in light of the provision’s rationale that is to protect consumers’ weaker position vis-à-vis businesses (see also Caixabank (Loan arrangement fees), C-565/21, EU:C:2023:212, para 30). The consumer must be able to understand what ‘economic consequences’ derive for her or him from the term (para 38, emphasis added) and the ‘nature of the services’ she or he receives (para 39, emphasis added). 

The national court will be in charge of determining whether the financial institution has provided sufficient information for her or him to understand the content and functioning of the term (para 40). The court will thus assess the transparency of the terms, taking into consideration ‘all the relevant factual elements’, which include also the advertising that the bank makes of the particular agreement (para 41; see also Caixabank (Loan arrangement fees), C-565/21, EU:C:2023:212, para 40). 

To summarise, the transparency requirement is intended to ensure that the consumer can assess the financial consequences of the term. Crucially, the requirement does not entail that the bank must detail the nature of the services supplied or the number of hours devoted to offering those services (para 44). 

The Court concludes that, like in the case at hand, where the legislation defines the term imposing the arrangement fee as remuneration for services connected with the examination, granting or processing of the mortgage loan, it is not necessary that the term includes ‘a detailed description of the nature of those services or an indication of the time devoted to their performance’ (para 47). 

It is however necessary that ‘the consumer has indeed been placed in a position to assess the economic consequence for him or her, to understand the nature of the services (…) 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’ (para 47).

The national case law of the Supreme Court is thus not precluded by Article 5 of the UCTD. 

Reaffirming Established Case Law, Withholding Guidance? – CJEU in APS Beta Bulgaria (Case C-337/23)

Foto von Linus Nilsson auf Unsplash

The recent ruling in APS Beta Bulgaria (C-337/23) provides another example of the Court of Justice reaffirming its established case law on consumer credit. However, it also illustrates a more subtle tendency: interpretative restraint. 

This post argues that, while the Court preserves the continuity of its case law, its reluctance to provide detailed interpretative guidance risks undermining the aim of achieving a high level of consumer protection.

Facts of the Case

In the case at hand, consumer-borrowers concluded credit agreements with Easy Asset Management AD and Credissimo AD, with an annual percentage rate of charge (APRC) of approximately 40–50% and repayment terms between three and eighteen months.  Under each agreement, consumers were required to provide security, including a guarantee, for which specific fees - exceeding 75% of the total amount repayable under the credit agreement - were charged. The guarantee was to be provided either by two natural persons meeting certain criteria, or by a bank or company selected or approved by the creditor. In each instance, the consumers tendered a guarantee from a company nominated by the creditor, including in one case a subsidiary of the creditor itself. Under Art. 147 ZZD (Bulgarian Law of Obligations and Contracts), a guarantor remains liable only if the creditor brings proceedings against the debtor within six months of the principal obligation becoming due. In the present case, guarantors satisfied the debt - except in one instance - after this period had expired, and subsequently assigned their claims to APS Beta Bulgaria EOD or Agentsia za kontrol na prosrocheni zadalzhenia AD, which then sought repayment from the consumers through order for payment proceedings. In these circumstances, the referring court (Sofia District Court) submitted questions for a preliminary ruling.

Reasserting jurisprudence constante

Some of the questions addressed in APS Beta Bulgaria have already been the subject of established case law in recent years. For example, in response to the fifth question, the Court of Justice reaffirmed that the classification of a commercial practice as unfair, following Pereničová and Perenič, constitutes just one aspect of the broader context within which standard terms are to be assessed for unfairness, under Art. 4(1) and Art. 3(1) UCTD (paras 75-77).

Similarly, the Court reaffirmed that national courts are under a duty to examine the unfairness of standard terms ex officio. However, a mere doubt as to their unfairness is not sufficient to support a finding to that effect. In this regard, the Court confirmed that where national courts are empowered to take investigative measures of their own motion to supplement the case file - provided that the audi alteram partem principle is respected - this power extends to order-for-payment proceedings. This position is consistent with case law beginning with Banco Español de Crédito, in which the ex officio obligations of national courts were recognised in the context of such proceedings. By confirming the relevance of the audi alteram partem principle, the Court also underscored that the parties to the proceedings are expected to assume an active role. In this respect, the Court reaffirmed its jurisprudence constante (e.g., ERSTE Bank Hungary, para 62; Sziber, paras 46-47; Lintner, paras 38–39, 44).

In answering the first question, the Court also reaffirmed its case law established in Kásler (paras 37-38), Matei (para 50) and Andriciuc (para 34), holding that the concept of the main subject matter of the contract under Art. 4(2) UCTD constitutes an autonomous concept of EU law (paras 49–52). The Court once again defined the main subject matter as the essential obligations of the contract, which do not appear to correspond directly to the concept of essentialia negotii under national law, particularly as there is no express reference to the law of the Member States (para 51). The issue arose as to whether the contract of guarantee might be excluded from unfairness control on the basis that it constitutes a separate agreement, whereas a guarantee would merely qualify as an ancillary term under the credit agreement. The Court held that the credit and guarantee agreements should be regarded as forming a single contractual relationship, especially where the costs of the guarantee are payable within the credit instalments. Accordingly, the assessment of whether a contract term constitutes a core term must be undertaken with reference to the essential nature of the obligation within the overall contractual relationship, rather than by isolating the contract of guarantee (paras 55–59). In so doing, the Court opened the way for the assessment of unfairness of the contract of guarantee, without classing it as falling under the scope of the exclusion under Art. 4(2) UCTD (paras 53–54).

A similar observation may be made regarding the Court’s answer to the eighth question. It confirmed that the concept of the total cost of credit to the consumer is defined broadly to include all costs which the consumer is required to pay in connection with the credit agreement. In this regard, it follows that the costs linked to a contract of guarantee - where the conclusion of such a contract is imposed on the consumer by a term in the credit agreement and contributes to the overall consumer’s debt - fall within both the concept of total cost and that of the APRC (paras 86-93). Notably, the Court did not engage with the concept of ‘total cost of the credit’ as an autonomous concept of EU law, although it might have done so, particularly given its approach in Soho Group (paras 39, 51). 

In a similar vein, the Court reasserted its case law on the proportionality of sanctions as developed in Profi Credit Bulgaria, namely that a failure to provide a correct APRC, accurately reflecting the extent of the consumer’s liability, may under national law (that is, it is proportional) result in the creditor being deprived of entitlement to interest and charges connected to the credit agreement. This raises the further question whether any failure to indicate the APRC - irrespective of its seriousness - may justify the same sanction, or whether certain inaccuracies, such as minor discrepancies (as under French law, see Art. R313-1 II Al. 4 C. con.) or errors in favour of the consumer (e.g., where the APRC indicated in the contract is higher than the actual one), could still be regarded as proportionate grounds for forfeiture of interests and charges linked to the credit agreement.

Some Doubts Regarding Interpretative Restraint

Although the Court has reaffirmed its jurisprudence constante, certain aspects of the judgment may nevertheless be viewed critically - particularly in relation to the Court’s interpretative restraint. 

For instance, in addressing the second and third referred questions, the Court focused on three types of contract terms that may be considered unfair under the Annex to the UCTD. These include terms (Point 1, (i), (j), (m) of the Annex I UCTD), which: first, irrevocably bind the consumer to provisions of which they had no real opportunity to become aware before the conclusion of the contract; secondly, allow the seller or supplier unilaterally to alter the terms of the contract without a valid reason specified therein; and thirdly, grant the seller or supplier the exclusive right to determine whether the goods or services supplied conform with the contract, or to interpret the terms of the contract unilaterally. As the Court observed, a contract term by which the consumer undertakes to conclude a contract of guarantee with a guarantor chosen by the lender - without being aware, at the time of concluding the credit agreement, of the guarantor’s identity or the terms of the guarantee - does not correspond to any of the contract terms listed in the Annex to the UCTD (paras 62–63). Nonetheless, this does not preclude its classification as unfair. Such a term must instead be assessed under the general unfairness criteria laid down in Art. 3(1) UCTD (para 63). What remains unclear, however, is why the Court refrained from offering more specific guidance on how such terms might be assessed for unfairness, or under what circumstances they could justifiably be found unfair under the criteria of Art. 3(1) UCTD. While it is true that this assessment ultimately falls to national courts, the Court has previously provided tailored guidance on the application of Art. 3(1) UCTD to specific types of terms - such as accelerated repayment clauses in Banco Primus (paras 65–67) or, more recently, in Všeobecná úverová banka (para 86). Its failure to do so in this case may be understood as a form of interpretative restraint, even though such guidance would have been of practical value to other Bulgarian courts in assessing similar clauses in related proceedings, including those not subject to the current reference in the preliminary ruling procedure. It remains to be seen whether more detailed guidance will be offered in the still pending analogous case Financial Bulgaria (C-426/23). 

A comparable concern arises from the Court’s answer to the fourth question on unfair commercial practices. Although the referring court sought only a classification of the practice as aggressive under Annex I to the UCPD (paras 66–71), the Court might have offered broader guidance on whether such a practice could also fall within the general concept of unfairness under this directive. Although such clarification - comparable to the guidance the Court has been providing under the UCTD - would have been of practical relevance for Bulgarian courts, this approach remains arguable, since the Court was bound by the narrowly framed question referred by the national court concerning Annex I of the UCPD. 

A further issue arises from the Court’s response to the sixth and seventh referred questions. The Court held that it could not assess the compatibility of national case law with, inter alia, Art. 5 and 7 UCTD, as both provisions concern contract terms rather than the legal effects that arise from the judicial application of national legislation (para 79). Although this distinction is formally correct, the Court could have engaged with the broader context or, at least, acknowledged that the UCPD framework may be relevant in such circumstances - particularly concerning time limitations. Where guarantors - potentially subsidiaries of the lender and within one overreaching contractual framework - satisfy the debt after the applicable national limitation period has expired, such conduct may effectively circumvent debtor-protective rules. This raises serious concerns whether such commercial practices could not be viewed as unfair commercial practices under the UCPD framework.

Of particular interest is that the Court did not classify the credit agreement and the contract of guarantee as a linked credit agreement within the meaning of Art. 3(n) CCD (2008), thereby excluding the application of Art. 15 of that directive (paras 80–85). While this narrow conclusion is justified on the basis of a literal interpretation of the referral, the Court could have addressed Art. 17 CCD, a provision invoked by the Commission during the proceedings (AG, para 25). A more thorough engagement with this provision would have offered clearer guidance to national courts in cases involving analogous contractual arrangements where one agreement, such as a guarantee, is intrinsically linked to another, such as a credit agreement.

Where Now?

The underlying doubts surrounding the Court’s interpretative restraint in this case may be understood through the lens of judicial dialogue. As AG Collins observed in his Opinion (AG, paras 24–25), it is the responsibility of national courts to formulate the questions referred to the Court of Justice, and the Court limits itself to answering the questions so posed. Nonetheless, the Court’s reliance on a strictly literal reading of both the referred questions and the applicable legal provisions - without situating them in their broader factual and regulatory context - reflects a form of interpretative restraint or even escapism. This approach appears designed to preserve the formal boundaries of judicial dialogue, but it comes at the expense of substantive guidance for national courts. In other words, such interpretative restraint appears to balance judicial dialogue over the need to provide legal certainty for consumers - and, by extension, over the achievement of a high level of consumer protection. This is particularly problematic when it comes to clarifying general clauses or engaging with provisions such as Art. 17 CCD (2008). The issue is especially pressing considering growing concerns about informal debt collection practices, which have recently been the subject of detailed academic analysis (see Stănescu 2025, in OA). What emerges from this case is a broader and more pressing question: does APS Beta Bulgaria reflect an isolated instance of an overemphasis on judicial dialogue, or does it signal a broader shift toward interpretative restraint - or even escapism - in the Court’s ever-evolving case law?

Credit reference agencies, consumer profiling and the GDPR: the CJEU in C-203/22

On February 27, 2025, the CJEU delivered an important judgment on the interpretation of Article 15(1)(h) and Article 22 of Regulation (EU) 2016/679 on General Data Protection (GDPR) in C-203/22 CK Magistrat der Stadt Wien v Dun & Bradstreet Austria GmbH.

The facts

The mobile phone operator refused CK’s request to conclude or extend the mobile telephone contract for a monthly payment of a mere EUR 10. The refusal was justified with CK not passing a creditworthiness check with the credit reference agency D & B, which carried out an automated assessment. Unsurprisingly, CK was unhappy with the decision; her credit score was good. She brought the matter to the Austrian data protection authority and, with this, started a long way to the preliminary reference, going through various instances and avenues for protection.  

The referring court raised several questions, which the CJEU grouped into essentially two questions:

The first question

Must Article 15(1)(h) be interpreted as meaning that, in the case of automated decision-making, including profiling, within the meaning of Article 22(1), the data subject may require the controller to provide, ‘meaningful information about the logic involved’ in the decision making, which would mean an exhaustive explanation of the procedure and principles actually applied in using personal data to obtain a specific result, in this case, a creditworthiness assessment.  

According to Article 15 (h), the data subject has the right to obtain from the controller confirmation as to whether his/her personal data is being processed, information on the use of automated decision-making where applicable, including profiling, referred to in Article 22(1) and (4), and meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject.

Article 22 provides that the data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, and that certain data enlisted in Article 9(1) GDPR such as racial or ethnic origin, religious beliefs cannot be considered in data processing.

Profiling, in this context, means automated processing of personal data, consisting of using personal data to analyse or predict the consumer's economic situation.

In its analysis, the CJEU first turned to a literal interpretation of the wording of Article 15 (h) and concluded that the concept of ‘meaningful information’ under that provision may have various meanings in different language versions of GDPR, which should be taken to be complementary to each other. In addition, the ‘logic involved’ in automated decision-making, which constitutes the subject matter of ‘meaningful information’ is capable of covering a wide range of ‘logics’ concerning the use of personal data and other data with a view to obtaining a specific result by automated means. The CJEU held, that the provision covers all relevant information concerning the procedure and principles relating to the use, by automated means, of personal data with a view to obtaining a specific result.

The CJEU next turned to contextual analysis of the concept of ‘meaningful information about the logic involved’, within the meaning of Article 15(1)(h). In this analysis the CJEU looked at the  Guidelines on automated individual decision-making and profiling for the purposes of Regulation 2016/679 and other provisions of the GDPR providing information duties of data controllers. The CJEU concluded that information duties relate to all relevant information that should be provided in clear, concise, transparent, intelligible and easily accessible form, using plain and clear language

Finally, the CJEU looked at the purpose of the provision, asserting that the purpose of the data subject’s right to obtain the information provided for in Article 15(1)(h) is to enable him or her to effectively exercise the rights conferred on him or her by Article 22(3), namely, the right to express his or her point of view and to contest the relevant decision. This, in turn, requires the right to obtain an explanation of the decision.

The CJEU then concluded that under Article 15(1)(h) the right to obtain ‘meaningful information about the logic involved’ in automated decision-making must be understood as a right to an explanation of the procedure and principles actually applied in order to use, by automated means, the personal data of the data subject with a view to obtaining a specific result, such as a credit profile. In order to enable the data subject to effectively exercise the rights conferred on him/her by the GDPR and, in particular, Article 22(3), that explanation must be provided by means of relevant information in a concise, transparent, intelligible and easily accessible form. Notably, the court further provided guidance on what is considered to be ‘meaningful information about the logic involved’ in automated decision-making. The procedures and principles actually applied must be explained in such a way that the data subject can understand which of his/her personal data have been used in the automated decision-making and the extent to which a variation in the personal data taken into account would have led to a different result. The requirements of Article 15(h) cannot be met by the mere communication of a complex mathematical formula, such as an algorithm, or by the detailed description of all the steps in automated decision-making since neither of those would constitute a sufficiently concise and intelligible explanation.

Second legal question

Another important contribution of the present judgment is the consideration of the relationship between Article 15(1)(h) and Directive 2016/943 on trade secrets, given that D&B argued that the logic of their automated decision-making, including what information is considered in which way, is a trade secret and should, therefore, not be disclosed.  

The CJEU highlighted that the protection of personal data is not an absolute right. Restrictions are possible of the scope of the obligations and rights provided for in, inter alia, Article 15 of the GDPR, but only when such a restriction respects the essence of the fundamental rights and freedoms and is a necessary and proportionate to safeguard the protection of the rights and freedoms of others. However, the result of any consideration on the limits of the protection of personal rights should not be a refusal to provide all information to the data subject.

The CJEU concluded that Article 15(1)(h) must be interpreted as meaning that, where the controller takes the view that the information to be provided to the data subject is a trade secrets, within the meaning of point 1 of Article 2 of Directive 2016/943, that controller is required to provide the allegedly protected information to the competent supervisory authority or court, which must balance the rights and interests at issue with a view to determining the extent of the data subject’s right of access provided for in Article 15 of the GDPR.

Our analysis

This decision is significant in addressing the long-standing problem of the lack of transparency in automated decision-making by credit reference agencies,  an important problem in the EU. Given that in most countries we have access to our credit reports we can know what data is considered in their decision making in producing a credit score and a credit report, however, credit reference agencies have refused disclosing the way this data is processed, the logic behind their decision making, in what way and to what extent various data is considered (weighted) in their decision making.  Although based on this decision, consumers are still not entitled to get hold of that information directly, but a first step has been made by mandating disclosure to the relevant authority who then makes a decision on whether or not to disclose it to the consumer, balancing the rights and interests of the two parties. This and other judgments of the CJEU (see C-634/21 SCHUFA Holding) may be gradually bringing transparency into this traditionally very untransparent area.

As credit reference agencies nowadays use artificial intelligence for automated decision-making, the judgment is relevant for advancing transparency considerations of AI systems.

Finally, given that the judgment tackles the operation of credit reference agencies, which are frequently used by creditors to assess the affordability of loan applications, it is relevant for responsible lending rules in Directive 2023/2225 on consumer credit (CCD2), which in Article 18 refers to creditworthiness assessment based on automated processing of personal data. 

Sanctions for Not Providing Essential Information in Credit Contracts - CJEU in Lexitor II (Case C-472/23)

Foto von Towfiqu barbhuiya auf Unsplash

The case concerned a debt collection agency (Lexitor), acting as an assignee of the rights of a consumer who had concluded a consumer credit agreement with a bank for an amount of approx. 9.000 EUR. In addition, the consumer was required to pay capital interest (approx. 4.500 EUR) and a commission fee (approx. EUR 1.100), whereas the Annual Percentage Rate of Charge (APRC) was specified at 11.18%. Lexitor argued that, since the APRC was partly calculated on the basis of unfair contract terms, the bank had failed to provide the correct APRC in the agreement. Consequently, Lexitor sought to recover the total sum of interest and costs as a sanction prescribed under national law. 

The first question was whether the creditor had failed to fulfil its obligation to provide the APRC in the credit agreement where the APRC was overstated due to certain contract terms being declared unfair. The Court emphasised that, although the actual APRC would indeed be overstated if calculated with reference to non-binding unfair contract terms, Article 19(3) of the Consumer Contract Directive (CCD; Directive 2008/48 on credit agreements for consumers) requires that the APRC be calculated based on the assumption that the credit agreement is to remain valid for the period agreed and that the creditor and the consumer will fulfil their obligations under the terms and by the dates specified in the credit agreement (para 34). Consequently, where the APRC is determined in accordance with the mathematical formula set out in Annex I to the directive - incorporating the total cost of credit to the consumer, including costs payable under the contract’s terms - the creditor does not infringe its obligation to provide the APRC in the credit agreement. This remains the case even if some of the terms on which the APRC was calculated are subsequently declared unfair and therefore not binding on the consumer (para 35).

The Court also addressed the question of whether listing various circumstances under which charges connected with the performance of the credit agreement may increase, without enabling the consumer to determine whether those circumstances have arisen, constitutes a breach of the creditor’s information obligation under the CCD. The Court referred to its established case law, holding that the terms of the credit agreement must be drafted transparently so that an average consumer can foresee, on the basis of clear and intelligible criteria, the changes that may be made to such charges (paras 41–44). Applying this principle to the contract terms in question, the Court concluded that where a credit agreement enumerates specific circumstances justifying an increase in charges without enabling the average consumer to ascertain whether those circumstances have materialised and their effect on the charges, this constitutes an infringement of the creditor’s obligation to provide information (paras 45–47).

Finally, the Court considered whether Article 23 CCD precludes national legislation that, in cases of infringement of the creditor’s obligation to provide information under Article 10(2) CCD, imposes a uniform penalty depriving the creditor of its right to interest and charges, irrespective of the seriousness of the infringement or its effect on the consumer’s decision. The primary concern was whether such a sanction would be proportional (para 51). Drawing upon its previous case law, the Court reaffirmed that Article 10(2) CCD sets out essential information that consumers must receive to assess the extent of their liability. A breach of this obligation may be sanctioned under national law by the forfeiture of the creditor’s entitlement to interest and charges (paras 53–54). The Court then turned to the specific circumstances of the case. Since the obligation to provide the APRC had not been infringed (first question), it focused instead on the conditions under which costs related to the performance of the agreement (such as commission fees) could be changed, considering this equally vital information under the CCD due to its impact on consumers’ financial obligations (para 55). The Court emphasised that the principle of proportionality does not preclude a Member State from imposing a uniform penalty depriving the creditor of its right to interest and charges for breaches of information obligations under Article 10(2) CCD, including those relating to the calculation of charges connected with contract performance, even where the gravity of the infringement may vary (para 57).

A Short Comment

The Court’s answers to the second and third questions are not surprising. It confirmed that the average consumer standard has been employed to assess the transparency of contract clauses under the CCD framework, as seen previously in BMW Bank, and has been extensively applied in consumer credit case law since Kásler. The response to the third question reaffirms that the information contained in a credit agreement (Article 10(2) CCD) is essential for the consumer to make an informed decision; consequently, failure to comply with this obligation may trigger sanctions under national law. The Court appears to have linked the proportionality of the sanction to the essential nature of the information provided.

The Court’s reasoning in relation to the first question, however, may be called into question. A literal interpretation of Article 19(3) CCD does not address the unfairness of terms used by the creditor but instead focuses on two distinct elements: first, that the APRC’s calculation is based on the assumption that the credit agreement remains valid for the agreed period; and second, that both parties will fulfil their respective obligations under the agreement. The unfairness of certain contract terms, on the other hand, means that they are null and void ab initio under Article 6(1) of the Unfair Contract Terms Directive, with the consequence that no obligations arise from them.

The first part of Article 19(3) CCD assumes the continued validity of the credit agreement. However, since finding the terms at issue null and void is unlikely to render the agreement invalid - as they do not appear to be essential to the contractual obligation (see Profi Credit Polska III, paras 68–70), although this must be verified under national law - this part of Article 19(3) CCD would not apply here. The same reasoning extends to the second part of Article 19(3) CCD: if obligations based on unfair terms do not exist ab initio, there is no obligation to fulfil on the side of any of the party.

It is also unclear how concluding that the APRC’s calculation, when partially based on unfair contract terms - leading to an overstatement of the APRC - does not infringe the information obligation under Article 10(2)(g) CCD, would contribute to achieving a high level of consumer protection. This raises at least three concerns.

First, in such cases, creditors would not face additional disincentives against using unfair terms in credit agreements. This appears inconsistent with Recital 20 of the CCD Preamble (“Creditors’ actual knowledge of the costs should be assessed objectively, taking into account the requirements of professional diligence”), which suggests that creditors could reasonably be expected to know when they are using unfair terms.

Second, since the APRC was overstated, it is unclear how the average consumer could accurately determine - not merely approximate - the extent to which the stipulated APRC would affect their future rights and obligations under the credit agreement. This appears to contradict the Court’s reasoning in its response to the second question, where the transparency of information is deemed crucial for consumer decision-making.

Third, it also seems to conflict with the Court’s reasoning in Pereničová and Perenič, here it held that an incorrect APRC constitutes false information regarding the total cost of credit and the price under Article 6(1)(d) of the Unfair Commercial Practices Directive (UCPD), as it causes or is likely to cause the average consumer to make a transactional decision they would not have otherwise taken (para 41). However, the Court may have drawn a distinction between cases where the actual APRC is lower than that stipulated in the contract (Lexitor II) and those where it is higher (Pereničová and Perenič), as well as between the transparency requirements under the CCD and those under the UCPD. Yet, these distinctions are not explicitly addressed in the commented judgment. Further clarification from the Court on this point would be necessary to provide much-needed clarity.

CJEU on Buy Now Pay Later (C-409/23): not consumer credit unless it is

Not that fresh, still hot: last month, the CJEU issued a remarkable decision in Case C-409/23 (Arvato), a preliminary ruling request from the Dutch Supreme Court concerning so called "buy-now-pay-later" (henceforth: BNPL) schemes and their qualification in the context of European consumer credit rules. 

While payment in instalments, with our without intermediaries, has been around for a pretty long time, not all European consumer markets are equally permeated BNPL schemes, which are very popular and common - for instance - in the Netherlands. In these schemes, consumers can conclude online transactions in a webshop and only pay at a later stage, when they receive an invoice by a third party that takes up the invoicing and provides payment security to the seller. If this reminds you of a credit card, that's not odd at all: these services essentially aim to provide services akin to those of a credit card, without the long-term credit contracts (and eligibility controls) associated to traditional models. Some, in fact, even go as far as to provide an own app-environment through which consumers can reach web shops. 

In return for these services, BNPL companies sometimes charge sellers/service providers a fee; they usually also charge consumers a small - even nominal - fee. According to consumer advocates, however, a significant portion of their revenue comes from consumer non-performance, in the form of late payment interests and debt collection fees. Civil law courts are then confronted with claims aiming to force consumers to pay their growing debts; in the Netherlands, many (but not all!) local courts have started to treat these contracts as credit contracts, even though officially in most cases the BPNL company has formally just been assigned the original credit by the seller. Why?

The advantage of considering BNPL as credit contracts is technical but also quite substantial: in many cases, Dutch courts are then able to invalidate the credit contract based on breach of core information requirements, leaving the consumer with, in essence, only the principal to pay. This is a particularly favourable outcome when, as is not rarely the case, the original purchase is only worth a small amount but the collection fees and default interest have been cumulating for a while. 

Whether BNPL should, under current rules, be considered a credit contract depends in no small part on how one interprets the "old" Consumer Credit Directive, which excludes certain transactions from its scope. In particular, Article 2(2)(f) of that Directive excludes contracts "where the credit is granted ‘free of interest and without any other charges’ or [...] under the terms of which ‘only insignificant charges are payable’". Dutch courts, however, have been considering the collection fees and late-payment interest as part of the cost of credit, making the contract (maybe free of interest but) not "without any other charges" or including only "insignificant charges". The Dutch Supreme Court was unsure whether this approach was in line with the Directive and asked the CJEU to solve the question for them - do default interest and out-of-court collection fees count as "cost of credit" in the context of assessing whether a credit contract has been entered?

The Court of Justice answers the question over a succinct few paragraphs: first (para 44), it notes that the letter of the law points to "interest" and "other charges" to only be relevant when "provided for at the time of conclusion of the credit agreement". This suggests excluding default interest and collection fees because "the non-performance by a consumer of his or her payment obligation and the duration of any such non-performance are, in principle, unforeseeable at that time". Second (para 46), considering such interests and charges as part of the cost of credit would largely hollow out the exception established at article 2(2)f since only contracts providing absolutely no consequence for non-performance by the debtor would be covered. Hence, in principle where credit is provided for free or against a negligible fee the fact that fees and interests will have to be paid in case of non-performance does not turn the relationship into a credit contract under the Directive. 

However, the Court observes (para 49-50), both the Dutch government and the referring Court suggest that default interest and collection fees are to be considered integral part of the provider's business model; the Directive, at the same time, requires Member States to make sure that its provisions cannot be circumvented "as a result of the way in which agreements are formulated". In light of the above, national courts have to make sure they guarantee the effectiveness of the Directive, and in particular

ascertain whether, in reality, the creditor is seeking to circumvent its obligations under Directive 2008/48 by anticipating, from the time the credit agreement is concluded, the non-performance by the consumer of the payment obligation in order to seek an economic advantage from the latter’s liability for interest and default charges. To that end, it will be for that court to examine all the circumstances present at the time when the agreement in question was concluded and other relevant information, such as, inter alia, the statutory or contractual origin of the interest and default charges, the periods within which that interest and those charges become payable and the amount of that interest and those charges.

This is a difficult task for national courts. Pending a decision by the Dutch Supreme Court, our sources suggest that local courts are reacting in different ways: some are just assuming that they can go ahead with treating the contracts as consumer credit; other courts are asking BNPL providers additional information about their business model in order to ascertain whether they do, indeed, plausibly expect a significant percentage of "their" customers to incur late payment fees; some are de-prioritising affected cases while awaiting a result, and some others, finally, are assuming that the CJEU's decision means BPNL is not credit after all. 

The uncertainly is naturally limited in time - the article 2(2)h in the Consumer Credit Directive 2023 explicitly limits the exemption to cases in which deferred payment is offered by the provider of the underlying good or service, with the exclusion of commercial third parties; however, it is also rather consequential for all actors involved - providers, debtors and courts.  

One size fits all? Average consumer in collective proceedings, CJEU in C‑450/22

 Dear readers, 

it is with genuine excitement (albeit with some delay) that I type out some thoughts in reaction to a very rich new decision by the CJEU, namely Caixabank and others of 4 July 2024 (C‑450/22).

This case is, shockingly but not incredibly, yet another instalment in the floor clauses saga that we have so often written about. It is especially salient, however, both in that it delivers additional insight in the relationship between the national and European dimensions of the story, and in that it decides important points of law in the still relatively underdeveloped area of collective proceedings. 

Our readers will remember the story: in 2013, the Spanish Tribunal Supremo (TS) declared that commonly used “clausolas suelo”, or “floor terms” which made sure that interest rates in variable interest rate mortgage contract would, counterintuitively, never change below a certain minimum rate – were unfair. The case subsequently reached the CJEU when the same TS tried to limit in time the effects of its judgement - which the CJEU (in its 2016 Gutiérrez Naranjo case) decided it was not the TS's call to make. Years later, the controversy is not over since affected consumers are still trying to recover unduly paid interests.

What was this specific preliminary ruling application about, though? The TS was invested with questions of law concerning a very large cease-and-desist cum damages lawsuit against, eventually, circa one hundred banks. The dispute followed declarations that floor terms included in many contracts were non-transparent and unfair under the Spanish rules implementing the Unfair Terms Directive. Spanish courts had previously found that this unfairness occurred, in particular, when the terms considered were presented in particularly misleading ways - hidden, framed by terms that looked like they reduced their impact, and so forth. The defending banks, however, questioned the rather wholesale application of the transparency test - was it not supposed, according to the UTD and CJEU case law, to be carried out having in mind the specific circumstances of each individual case? How could it be applied, in collective proceedings, to clauses in different contracts, offered to different customers, with different variations of the overall contract drafting?

This question was asked at two levels: first, as to whether in general the idea of collective proceedings for transparency did not clash with the possibility to assess on a case-by-case basis; second, whether in the specific case of this dispute, concerning contracts offered to very different segments of the consumer mortgage markets, it would not be misplaced to apply the same "average consumer" standard to assess all the concerned terms. Ex ante, the first question would have looked moot to an informed observer; the second seems to me less obvious, even though the Court seemed to find it relatively easy to answer. We will look at those questions in order. 

In the first question, the court had to consider whether transparency assessment under the UCTD could be carried out "in the context of a collective action brought against a large number of sellers or suppliers operating in the same economic sector, and concerning a very large number of contracts."

In answering this question, the Court acknowledged that in individual proceedings, assessing whether a term meets the transparency requirement requires considerations of the circumstances surrounding the conclusion of the individual contract. This specific feature of the assessment can obviously not be transposed to collective proceedings. The rest of the test, however, can be transposed. In this sense, national courts will have to assess

"in the light of the nature of the goods or services which are the subject matter of the contracts concerned, whether the average consumer, who is reasonably well informed and reasonably observant and circumspect, is in a position, at the time the contact is concluded, to understand the functioning of that term and to evaluate its potentially significant economic consequences. To that end, that court must take into account all the standard contractual and pre-contractual practices followed by each seller or supplier concerned, including, in particular, the drafting of the term in question and its position in the standard-form contracts used by each seller or supplier, the advertising employed for the types of contract concerned by the collective action, the dissemination of generalised pre-contractual offers aimed at consumers and any other circumstances which the court might consider relevant in order to exercise its power of review with regard to each of the defendants"

The national court, thus, will have to apply the average consumer test to a range of different practices and different actors. This can make the litigation complex, but, according to the Court, does not make collective proceedings non-viable as long as they meet the two requirements set in the directive's article 7(3), namely that they concern similar terms used or recommended by operators or associations of operators in the same sector. A different interpretation would plausibly undermine the whole construction of collective proceedings under the provision. 

So far, so good. The next part of the answer, however, may prove a bit trickier in the future. The second question, the Court said, required essentially to consider whether the average consumer, "who is reasonably well informed and reasonably observant and circumspect" can be used as benchmark to assess the transparency of a term (or similar terms) used in multiple contracts "where those contracts are aimed at specific categories of consumers and that term has been used for a very long period of time during which the degree of awareness of that term was developing." (para 47)

In the case under consideration, the referring court had observed that the concerned contracts had been concluded, over a long period of time, by "consumers who had taken over mortgage loans concluded by real estate developers, consumers coming under social housing finance programmes or public housing access programmes according to certain age brackets, or consumers who had obtained loans under a special scheme on account of their profession" (para 51). 

According to the CJEU, however, it is "exactly the heterogeneity" of the public concerned that makes recourse to the "legal fiction" of the average consumer necessary in order to be able to assess the terms in collective proceedings. (para 52). In contrast, it is possible that different assessments concerning the transparency of a term at the time of concluding the contract could have to be made because of supervening events alerting the general public to the significance of certain terms - here, the floor clauses. National courts can take this into account, to the extent that such a change in perception could be documented on the basis of "concrete and objective evidence" rather than "inferred from the passage of time alone" (para 55).  The judgement recalls that, during oral proceedings, the objective event or matter of common knowledge could consist in the collapse in interest rates, characteristic of the 2000s, which led to the application of the floor clauses and therefore to consumers becoming aware of the economic effects of those clauses, or in the delivery of judgment No 241/2013 of the Tribunal Supremo (Supreme Court) of 9 May 2013, which found that those clauses were not transparent" were suggested as possible relevant moments - it is then for the referring court to ascertain whether such events would have led to a change "over time, in the level of attention and information of the average consumer at the time a mortgage loan agreement was concluded." (para 56). 

The follow-up of this case will be interesting to observe for at least two reasons: on the one hand, the question of what specific developments can be considered to have generated a change, in the degree of attentiveness, alertness or information, relevant to how an average consumer would have understood a certain clause requires a degree of fact-finding that is partially at odds with the abstracting ideal of the average consumer. It also leaves national courts, and potentially lower courts, considerable leeway – especially given the limited reviewability of matters of fact in many jurisdictions. 

 

Second, while instrumental to an overall logical conclusion here – safeguarding the Directive’s explicit indication that collective proceedings should not be confined to entirely homogeneous terms and contracts – the idea that the target consumer doesn’t matter for applying the average consumer test seems to contradict the spirit of the Unfair Commercial Practices directive, which the average consumer notion is ultimately borrowed from. In that context, namely, article 5(2) declares unfair a practice that is likely to affect the economic behaviour of the average consumer or “the average member of the group when a commercial practice is directed to a particular group of consumers” -the so-called “targeted consumer” benchmark. Why would the referring court not be expected or be able to consider these different targeted consumers? Besides being potentially at odds with the UCPD, this insistence on abstraction seems to contradict the Court’s insistence that national courts can distinguish between what average consumers would understand before a certain event and what they would understand thereafter: if empirics matter in this case, why not with reference to targeted consumers?

Don't know about you, but I will be taking this question with me into my holidays! Hopefully many interesting developments to comment on after the summer break. Stay tuned 