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CJEU Joined Cases C-96/16 and C-94/16 / Judgment

Banco Santander SA v Mahamadou Demba and Mercedes Godoy Bonet and Rafael Ramón Escobedo Cortés v Banco de Sabadell SA.
Policy area
Consumers
Deciding body type
Court of Justice of the European Union
Deciding body
Court (Fifth Chamber)
Type
Decision
Decision date
07/08/2018
ECLI (European case law identifier)
ECLI:EU:C:2018:643

EU Charter of Fundamental Rights

Title IV: Solidarity

Article 38 - Consumer protection

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  • CJEU Joined Cases C-96/16 and C-94/16 / Judgment

    Key facts of the case:

    Reference for a preliminary ruling — Directive 93/13/EEC — Unfair terms — Scope — Assignment of debts — Loan agreement concluded with a consumer — Criteria for assessing the unfairness of a contractual term setting the default interest rate — Consequences of that unfairness.

    Outcome of the case:

    On those grounds, the Court (Fifth Chamber) hereby rules:

    1. Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, must be interpreted, first, as not applying to a business practice consisting in assigning or purchasing a consumer’s debt, without any provision for such an assignment having been made in the loan agreement concluded with the consumer, without giving the consumer prior notice of that assignment, without his consent and without giving him the opportunity to buy back and thereby extinguish his debt by reimbursing to the assignee the price it paid in respect of that assignment, plus the applicable interest, expenses and costs. Secondly, that directive does not apply to national provisions, such as those contained in Article 1535 of the Código Civil (Civil Code) and Articles 17 and 540 of Ley 1/2000 de Enjuiciamiento Civil (Civil Procedure Code) of 7 January 2000, which regulate that opportunity to buy back a debt and govern the replacement of the assignor by the assignee in ongoing proceedings.
    2. Directive 93/13 must be interpreted as not precluding national case-law, such as that of the Tribunal Supremo (Supreme Court, Spain) at issue in the main proceedings, whereby, in a loan agreement concluded with a consumer, a non-negotiated term fixing the default interest rate applicable is unfair, on the ground that the consumer who is late performing his payment obligation is required to pay a disproportionately high sum in compensation, where that rate exceeds by more than two percentage points the ordinary interest rate provided for in that agreement.
    3. Directive 93/13 must be interpreted as not precluding national case-law, such as that of the Tribunal Supremo (Supreme Court) at issue in the main proceedings, whereby the consequence of the unfairness of a non-negotiated term fixing the default interest rate in a loan agreement concluded with a consumer consists in the complete elimination of that interest, while the ordinary interest provided for in that agreement continues to run.
  • Paragraphs referring to EU Charter

    29) In those circumstances, the Juzgado de Primera Instancia No 38 de Barcelona (Court of First Instance No 38, Barcelona) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

    ‘(1) (a) Does the business practice of assigning or purchasing debts without offering the consumer the opportunity to extinguish the debt by paying the price, interest, expenses and costs of the proceedings to the assignee comply with European Union law, and specifically with Article 38 of the [Charter of Fundamental Rights of the European Union] … and Articles 4(2), 12 and 169(1) [TFEU]?

    (b) Is that business practice of purchasing a consumer’s debt for a negligible price without his consent or knowledge, without including that practice as a general condition or unfair term imposed in the agreement, and without giving the consumer the opportunity to participate in that operation by purchasing and thus extinguishing the debt, compatible with the principles laid down in Directive [93/13] and, by extension, with the principle of effectiveness and with [Article] 3(1) and [Article] 7(1) of that directive?

    (2) (a) For the purpose of safeguarding the protection of consumers and users and the Community case-law which develops it, is it in accordance with European law, Directive 93/13 and in particular Article 6(1) and Article 7(1) thereof, to establish as an unequivocal criterion that, in unsecured loan agreements concluded with consumers, a non-negotiated term which sets a rate of default interest that exceeds by more than two percentage points the basic contract rate of interest (“ordinary interest”) is unfair?

    (b) For the purpose of safeguarding the protection of consumers and users and the Community case-law which develops it, is it in accordance with European law, Directive 93/13 and in particular Article 6(1) and Article 7(1) thereof, to establish, as a consequence, that ordinary interest will accrue until the debt has been paid in full?’