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).

Don't forget about the price tag: judgment in Spanish cases on mortgage costs and legal costs

Another judgment we haven't yet reported on this blog is the CJEU's judgment in Joined Cases C-224/19 CY/Caixabank and C-259/19 LG and PK/BBVA. In short, the judgment pertains to a clause that imposes the costs of vesting and cancelling a mortgage on the (consumer-)debtor, which can be viewed as an unfair term. Moreover, the judgment pertains to the limitation period that applies to claims for reimbursement - the topic of the day, see our previous blog - and legal costs.

The cases on mortgage costs, "gastos hipotecarios", have drawn a lot of attention in Spain. The CJEU 's judgment of 16 July 2020 in Caixabank opens the door to an estimated 8 million consumers who have taken out a mortgage and can now bring a reimbursement claim against their bank. Click here for an overview of costs that may be involved, including a registration fee. From the perspective of EU consumer law, the first part of the judgment is not even that revolutionary: if the cost clause at issue is found to be unfair, the consumer is entitled to reimbursement of the costs paid on the basis of that clause. In this respect, the CJEU confirms what it held earlier in Gutiérrez Naranjo: nullity is nullity. An exception is only possible if there is a national legislative provision - i.e., not the clause itself - that serves as a basis to impose costs on the consumer. In Spain, such an exception only exists for the so-called "Impuesto de Actos Jurídicos Documentados" (IADJ, a mortgage tax).

The second part of the judgment confirms earlier case law, in particular Gómez del Moral Guasch and Kiss and CIB on core terms and transparency. Articles 4(2) and 5 of the Directive preclude national case law that deems a contractual clause to be transparent in itself, without an analysis of whether it constitutes a core term and whether it is drafted in plain and intelligible language. The CJEU adds that the mere fact that the costs involved are part of the total price of a mortgage loan does not mean that they must be considered as relating to the main subject matter of the contract. In respect of opening costs - a fixed fee for setting up the mortgage - the CJEU concludes that the clause may cause a significant imbalance to the detriment of consumers when the bank cannot prove those costs reflect actual services or expenses.

According to the Spanish Supreme Court, the bank must pay 100% of the registration fee; the notary fee and administration costs must be split 50/50 between the parties. One of the referring judges in the Court in First Instance of Palma de Mallorca doubts this, because administration and taxation costs are made in the interest of the bank and the consumer has no other choice.

Your blogger is not the only one who finds the part of the judgment on the limitation period for reimbursement claims more interesting. Such a limitation period should not make it practically impossible or excessively difficult for consumers to exercise their rights. The CJEU reiterates that if the limitation period would start at the conclusion of the contract, irrespective of consumers' knowledge or awareness of their rights, this could run counter to the principle of effectiveness and the principle of legal certainty. In national case law, a 5-year period is applied that starts running from the moment a term is found to be unfair. The first time the cost clause at issue was declared unfair by the Spanish Supreme Court was on 23 January 2019. This would mean the limitation period does not expire until 5 years later, but there is no legislative provision currently governing this.

As regards legal costs, the CJEU holds that they may be an obstacle that deters consumers from exercising their rights. Pursuant to Article 394 of the Spanish Code of Civil Procedure, no cost order is issued - and the parties bear their own costs - if the claim is only partially awarded. If the consumer's request for nullity is granted, but the cost order is made dependent on the amount to be reimbursed by the bank, this may have a deterrent effect. Therefore, the principle of effectiveness precludes the application of Article 394 along these lines. Once the clause is found to be unfair, the bank should pay the legal costs.

Knowledge is key: judgment in Joined Cases C-698/18 and C-699/18 Raiffeisen Bank and Société Générale

Earlier this month, the Court of Justice of the European Union gave judgment in Raffeisen Bank and Société Générale, two joined cases from Romania on limitation periods and Directive 93/13/EEC. This is not the first time we write about this topic; see e.g. our blog on Cofidis II, where it was observed that limitation periods as such are not necessarily incompatible with the principles of equivalence and effectiveness in EU law.[1] But they can be, as the CJEU's judgment of 9 July 2020 demonstrates, where they prevent consumers from claiming reimbursement of amounts paid on the basis of unfair terms in a credit agreement.

Source: wikipedia.org

Earlier case law of the CJEU reveals that knowledge or awareness on the part of consumers of their rights plays a crucial role in the assessment of cases on limitation periods.[2] Raiffeisen Bank confirms this.The CJEU reiterates that reasonable time limits for bringing proceedings, laid down in the interests of legal certainty, do not make it practically impossible or excessively difficult as such for consumers to exercise their rights conferred by EU law, if such time limits are sufficient in practical terms to enable them to prepare and bring an effective action. Under the rules at issue in Raiffeisen, however, a three-year limitation period started to run from the time when the contract - here: a credit agreement - had been performed in full. That is when the consumer was presumed to have known of the unfair nature of one or more unfair terms of that agreement. According to the CJEU, it is nevertheless possible that the consumers involved are not aware of this, which means the limitation period is likely to have expired before they can take action. This runs counter to the principle of effectiveness. Moreover, performance of the contract does not retroactively alter the fact that the consumer was in a weak position at the time it was concluded. The protection of Directive 93/13 is therefore not limited solely to the duration of the performance of the contract in question.

Under Romanian law, the unenforceability of unfair terms is equated with absolute nullity, the effect of which is restitutio in integrum. The limitation period normally begins to run when the court establishes the cause of action, not on the date of full performance of the contract. The CJEU holds that such a difference in treatment of consumers cannot be justified on grounds of legal certainty. Thus, the rules appear to run counter to the principle of equivalence as well.

In Case C-698/18, the action for reimbursement was brought within three years after the agreement had expired. The CJEU's judgment suggests that this does not matter; it is inconceivable that a limitation period would expire when the consumers involved are not even aware of the unfair nature of the terms of the agreement.
In Case C-698/18, the action was brought 11 years after the agreement had expired. But the agreement was concluded in 2003, i.e. before Romania's accession toe the EU in 2007. Thus, the CJEU did not have jurisdiction.

An important difference between Raiffeisen and Cofidis II is that in Cofidis, the consumer was the defendant, not the claimant. In that case, consumers should not lose their rights merely because a claim against them is brought after expiration of a limitation period. Again, what is decisive here is the risk that they have never been aware of their rights before they were able to invoke them. Knowledge is key.


[1] See also our blog on OPR-Finance. 
[2] See further this contribution by Daniël Stein, available only in Dutch. 

Time limits for consumer claims under Consumer Sales Directive - CJEU in Ferenschild

Setting the scene

The European debate on consumer sales law has taken an interesting turn these days. Its legislative dimension appears to be fixated on the two digital proposals tabled in 2015: on online and other distance sales of goods and on the supply of digital content. By contrast, case law on the good old Consumer Sales Directive has become awkwardly dominated by disputes related to the sales of used cars (see e.g. the widely commented Wathelet case from last year). Of course, legal questions addressed in this context remain of much broader relevance. This was also the case in C-133/16 Ferenschild, on which the Court of Justice ruled this Thursday (see also our previous post on AG's opinion).

In the commented case the CJEU was called upon to provide its guidance on several procedural stipulations of Directive 1999/44/EC. As indicated above, the case involved a purchase of a second-hand car which did not work out quite as planned. The source of non-conformity was rather unusual: the vehicle itself worked well, but could not be registered directly after delivery since its documents had earlier been used as a cover for a stolen car. Nevertheless, the actual crux of the dispute lied in its specific timing: although the defect became apparent shortly after delivery, formal claim for compensation was only made over one year later. 

This would not have been an issue had we been dealing with a regular sale of brand new products. After all, Article 5(1) read in conjunction with Article 3(1) of Directive 1999/44/EC provides that the seller shall be liable for the lack of conformity which exists at the time the goods were delivered and which becomes apparent within two years from delivery. It further clarifies that the limitation period for claims arising from the lack of conformity, if laid down by national law, shall not expire within an analogous period of two years. 

The situation can nevertheless be different with respect to contracts for the sale of second-hand goods. Article 7(2) of Directive 1999/44/EC allows Member States to provide, by way of derogation, that the seller and consumer may agree on a shorter time period for the liability of the seller arising from such contracts (although no less than one year). At the same time, the directive remains silent as to the duration of the limitation period which should apply in this situation. Since that question appeared to be of direct relevance to the unfortunate buyer in the case at hand, the referring court decided to stay the proceedings and seek guidance from the CJEU. 

The question referred can be summarised as follows (para. 32):

Must Article 5(1) and the second subparagraph of Article 7(1) of Directive 1999/44/EC be interpreted as precluding a rule of a Member State which allows the limitation period for action by the consumer to be shorter than two years from the time of delivery where the Member State has made use of the option given by the latter of those two provisions, and the seller and consumer have agreed on a period of liability of the seller of less than two years for the second-hand goods concerned?

Judgment of the Court

The Court largely followed the pro-consumer interpretation proposed by Advocate-General Szpunar earlier this year (see also our earlier post here), holding that a national rule, which would allow the limitation period afforded to consumers to be shortened as a consequence of the reduction of the period of liability of the seller to one year, is precluded by Article 7(1) of Directive 1999/44/EC.

In reaching that conclusion the CJEU relied on the following set of arguments. Firstly, it drew a distinction between two types of time limits referred to in Article 5(1), namely the period of liability of the seller and the limitation period (para. 33-35). The Court further emphasised the difference between aims pursued by both types of time limits as well as other factors which, in its view, supported the claim that duration of the limitation period was not contingent on that of the period of liability (such as the fact that the former does not necessarily commence at the time of delivery or that no reference to the first sentence of Article 5(1) is made in the second sentence of that provision). It then went on to discuss the wording on Article 7(1), read in conjunction with recital 16, and concluded that the derogation provided therein concerns only the period of liability of the seller and not the limitation period (para. 42-45). This interpretation was further supported by the fact that the second subparagraph of Article 7(1) constituted an exception to the rule expressed in its first part (on binding nature) and, as such, had to be interpreted strictly.

Concluding thought

By holding that the duration of the limitation period for action by the consumer should, in all cases, not be shorter than two years from delivery, the Court confirmed its strongly pro-consumer stance, which had already been visible in its earlier judgments - both on Consumer Sales Directive (Wathelet) and on Unfair Contract Terms Directive (from Aziz to Banco Primus). In the commented case, the Court relied heavily on the advice of the Advocate-General. However, as seen from the recent opinion in case C-598/15 Banco Santander (see also our post here), AGs are not always arguing in a similar vein. Therefore, even if the Court has so far remained largely consumer-friendly, and probably rightly so, one has to wonder if this pro-consumer direction is not going to reach its limit sometime soon.