Last Thursday the CJEU issued a new judgment in the saga of Swiss francs mortgage loan contracts (C-140/22 – there is no English language text available yet). It was a Polish court who asked for a clarification of a few issues related to voiding such contracts as a result of them containing an unfair contract term, the removal of which would not enable the contract to remain in force.
Declaring unfairness
The CJEU recalls its past judgment emphasising the obligation of national courts to assess (un)fairness of contract terms and ensure that any finding of unfairness results is fully remedied (Karel de Grote-Hogeschool Katholieke Hogeschool Antwerpen C-147/16 – with our comment – and Abanca C-70/17 – with our comment) (paras 53-55). Previous case law mentioned that consumers could, however, object to national courts attaching all the consequences resulting from finding of an unfair contract term, pursuant to the UCTD. Namely, when consumers are informed by courts about the presence of an unfair contract term in their contract, they could then decide, while fully informed, to still be bound by that term, which would give effect to the freedom of contract and the UCTD’s protection (para 57). The CJEU rightly emphasises now that this right for consumers to object to courts applying the UCTD provisions should not be interpreted as placing an obligation on consumers to declare that they do not object to the UCTD’s application (para 56). This could deter consumers from benefiting from the scope of the UCTD’s protection and further discourage traders from agreeing to consumers’ out-of-court settlement claims (para 61). The CJEU reminds also that even if consumers are not present at court, the CJEU has an obligation to ex officio assess the unfairness of a contract term and apply the consequences following from the UCTD (para 60).
In short, the CJEU decided that the Unfair Contract Terms Directive should not be interpreted by national courts as requiring consumers to declare: 1) their consent to voiding an unfair contract term; 2) their awareness of the consequences that this voidness would have (voiding the whole contract); and 3) their consent to voiding the whole contract.
Financial consequences of unfairness
The CJEU recalls that when a mortgage loan contract is declared void, due to the finding of an unfair core term, consumers should only reimburse the bank by the amount of a borrowed loan, and possibly also statutory interest if they delay this reimbursement (para 62; also Bank M, C-520/21 – see our comment). Any further claims for reimbursement by banks would limit the deterrent effect of the UCTD (para 63).
Consequently, if as the result of finding an unfair core contract term the entire mortgage loan contract is voided, the UCTD prohibits national courts from calculating the impact of that voidness in a way that deducts from the consumer compensation of loan amounts paid to the bank, amounts of interest that the bank would have received if the contract remained in force.
