European Case Law: Foreign Currency Loans

Judgment of the Court (Fourth Chamber) of 30 April 2014.
Árpád Kásler and Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt.
Reference for a preliminary ruling: Kúria – Hungary.
Directive 93/13/EEC – Unfair terms in a contract concluded between a seller or supplier and a consumer – Articles 4(2) and 6(1) – Assessment of the unfairness of the contractual terms – Exclusion of terms relating to the main subject­matter of the contract or the adequacy of the price and the remuneration provided they are drafted in plain intelligible language – Consumer credit contracts denominated in foreign currency – Terms relating to the exchange rate – Difference between the buying rate of exchange applicable to the advance of the loan and the selling rate of exchange applicable to its repayment – Powers of the national court when dealing with a term considered to be unfair – Substitution of the unfair term by a supplementary provision of national law – Whether lawful.
Case C-26/13.

Judgment

1. This request for a preliminary ruling concerns the interpretation of Articles 4(2) and 6(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29, ‘the Directive’ or ‘Directive 93/13’).

2. The request has been made in proceedings between Mr Kásler and Ms Káslerné Rábai (‘the borrowers’) and OTP Jelzálogbank Zrt (‘Jelzálogbank’) concerning the allegedly unfair contractual term relating to the exchange rate applicable to repayments of a loan denominated in a foreign currency.

Legal context

EU law

The twelfth, thirteenth, nineteenth, twentieth and twenty-fourth recitals in the preamble to Directive 93/13 state:

‘Whereas, however, as they now stand, national laws allow only partial harmonisation to be envisaged; whereas, in particular, only contractual terms which have not been individually negotiated are covered by this Directive; whereas Member States should have the option, with due regard for the [EEC] Treaty, to afford consumers a higher level of protection through national provisions that are more stringent than those of this Directive;

Whereas the statutory or regulatory provisions of the Member States which directly or indirectly determine the terms of consumer contracts are presumed not to contain unfair terms; … whereas in that respect the wording “mandatory statutory or regulatory provisions” in Article 1(2) also covers rules which, according to the law, shall apply between the contracting parties provided that no other arrangements have been established;

Whereas, for the purposes of this Directive, assessment of unfair character shall not be made of terms which describe the main subject­matter of the contract nor the quality/price ratio of the goods or services supplied; whereas the main subject­matter of the contract and the price/quality ratio may nevertheless be taken into account in assessing the fairness of other terms; …

Whereas contracts should be drafted in plain, intelligible language, the consumer should actually be given an opportunity to examine all the terms

Whereas the courts or administrative authorities of the Member States must have at their disposal adequate and effective means of preventing the continued application of unfair terms in consumer contracts’.

Article 1 of the Directive provides:

‘1. The purpose of this Directive is to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer.

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

According to Article 3 of the Directive:

‘1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.

The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair.’

Article 4 of Directive 93/13 is worded as follows:

‘1.Without prejudice to Article 7, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.

2.Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject­matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies in exchange, on the other, in so far as these terms are in plain intelligible language.’

Article 5 of the Directive provides:

‘In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language’.

Under Article 6(1) of the Directive:

‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms’.

Article 7(1) of Directive 93/13 provides:

‘Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers’.

According to Article 8 of the Directive:

‘Member States may introduce or maintain, in the area covered by this Directive, more stringent provisions compatible with the Treaty, to ensure a higher level of consumer protection’.

The annex to Directive 93/13 relating to the terms referred to in Article 3(3) thereof, contains, in point 1, a non-exhaustive list of terms which may be regarded as being unfair. In Point 1(j) are terms which have the object or effect of ‘enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract’. In Point 1(l), those which have the object or effect of ‘… allowing a … supplier of services to increase [his] price without … giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded’.

Point 2 of that annex relates to the scope of points (g), (j) and (l). Point 2(b) states, in particular, that ‘[s]ubparagraph (j) is without hindrance to terms under which a supplier of financial services reserves the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately. Point 2(d) states that ‘[s]ubparagraph (l) is without hindrance to price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described’.

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