Dear Readers, we wanted to update you on a few changes that have taken place in our merry blog team. After a few years of productive collaboration with Agnieszka Jabłonowska (Leiden University), she has decided earlier this year to give up this side project. It was a pleasure working with Agnieszka and we keep hope she may return to blog writing in the future. Since then, we have expanded our authors' team, thus you may shortly expect to see posts by new authors. Warm welcome to our three new contributors (in order of joining us): Marina Federico (Ca' Foscari University of Venice), Jie Ouyang (University of Groningen) and Dominik Dworniczak (EUI).
Recent developments in European Consumer Law
Tuesday 14 May 2024
Friday 10 May 2024
Reversed burden of proof under strict conditions to exercise early repayment rights of consumer credit- the CJEU in C-326/22
Case C-326/22 Z arose regarding Article 16(1) of Directive 2008/48/EC on consumer credit and the right to early loan repayment, which provides consumers with a right to repay their loan early and to the costs of the loan reduced accordingly.
The facts
Six consumers assigned to Z their claims regarding 15 consumer credit contracts that were repaid early, who intended to claim the total cost of credit reduction. However, under the applicable Polish law, Z needed to prove the claim's existence, which could have been only done by reference to the contract, but the consumers did not have the contract anymore. Consequently, Z requested access to the contracts, which the bank refused, saying there was no legal duty to do so. However, the referring national court rightly noted that the absence of such duty of the bank would lead to a contrary result to Article 16(1), which may, as in this case, effectively make the right to cost reduction unenforceable.
The legal question
The referring Polish court asked the CJEU whether Article 16(1), read in the light of the principle of effectiveness of EU law, must be interpreted as meaning that a consumer may request, from the creditor, a copy of that agreement and information concerning the repayment of the credit not featured in the contract when this is necessary to verify the calculation of the sum owed by the creditor connected to the early loan repayment right and for allowing that consumer to bring an action for the recovery of that amount.
The ruling
The answer was not apparent from the wording of Art. 16 (1). However, the CJEU noted that in interpreting the provisions of EU law, it is necessary to consider not only the wording but also the context of the provision and the objectives it aims to pursue, which is, achieving a high level of consumer protection.
Crucial is paragraph 26:
In that regard, it is relevant that Article 16(1) of Directive 2008/48 implies that the consumer is entitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the agreement, without needing to adduce evidence other than that of the early repayment of the credit. It follows that it is for the creditor to provide the information necessary to establish the amount of the reduction in the total cost of the credit to which the consumer is entitled.
If the information is unavailable in the contract, the creditor must provide that information to the consumer where it is necessary to calculate the amount owed by the creditor (para 27).
The CJEU ruled that Article 16(1) must be interpreted as meaning that a consumer may request, from the creditor, a copy of that agreement and all information concerning the repayment of the credit not featured in the agreement itself which is necessary for verifying the calculation of the sum owed by the creditor under the reduction in the total cost of the credit due to its early repayment and for allowing the consumer to bring a possible action for the recovery of that amount.
The approach was justified by the banks' duty to provide information to consumers via Article 10, which ensures a high level of consumer protection. This duty includes information to be incorporated into the contract and a copy of the agreement provided to the consumer. A credit agreement must be drawn up on a durable medium that should enable the consumer to easily access and store the information provided.
Our analysis
This rare interpretation of Article 16 follows the only case so far (Lexitor). A seemingly very technical judgment on access to documents turns into a decision that establishes an important legal principle. The court effectively reversed the burden of proof in exercising the rights connected to early loan repayment. Depending on how we define the burden of proof, this might not technically be a reversal of the burden. However, it is based on the same idea of easing the burden of proof. This is based on an understanding that the consumer cannot access the documents and that this access is an essential condition for realising the consumer's rights. The judgment is a significant development, given that the burden of proof was only previously reversed in connection to Article 5 -providing evidence that the creditor complied with pre-contractual information duties (CA Consumer Finance). However, the reversal of the burden of proof here has important limits. It only applies when:
1) the consumer does not have a copy of the credit agreement or if the agreement does not contain the relevant information, and
2) the information is necessary for verifying the calculation of the sum owed by the creditor to reduce the total cost of credit due to its early repayment, and
3) the information is necessary to allow the consumer to take action to recover the sum owed by the creditor.
The question is whether the judgement will have a broader effect of reversing the burden of proof regarding Article 10 more generally. This seems to be the direction, but it is yet to be confirmed by further CJEU judgments.
Thursday 9 May 2024
Financial services concluded at a distance in digital age - the new Directive 2023/2673
In 2023, European lawmakers were busy improving the protection of consumers in financial services. In addition to the new Directive 2023/2225 on consumer credit (on which we reported here), the regime distance marketing of financial service was also revamped. The new Directive 2023/2673 on financial services contracts concluded at a distance repeals the current Directive 2002/65/EC. The Directive entered into force on 18 December 2023, Member States are obliged to implement it by 19 December 2025 and apply the rules from 19 June 2026.
The 2023 Directive was driven by the need to ensure consumer confidence and trust in digital transactions. This need was underscored by the rapid development of digitalisation and the evolving means of distance communication, which have revolutionised how we use technology since the creation of the 2002 Directive. Digitalisation has also changed how products are marketed to consumers, with new products emerging in the online environment.
The other rationale was the progressive introduction of other sector-specific legislation that significantly overlapped the current, 2002 Directive, creating legal uncertainty.
The 2023 Directive clarifies its nature as a horizontal, general instrument that remains a safety net for matters not covered by other EU instruments or subject to exemptions. The Directive is a maximum harmonisation instrument and applies only to contracts concluded at a distance. Importantly, it amends Directive 2011/83/EU, which currently does not apply to financial services.
The Directive follows the current information approach to consumer production, detailing pre-contractual information duties and making the associated right of withdrawal more effective by mandating an easy-to-find 'withdrawal function' on the service provider online interface that should be continuously available during the withdrawal period. In laying down the rules on adequate explanations, the 2023 Directive adds the right to request human intervention when the trader uses online tools such as chatbots.
Finally, the 2023 Directive recognises the realities of the online world and the difficulties in making informed decisions, thus protecting consumers against dark patterns or deceptive design patterns.
The new directive is a welcomed development of EU consumer law. It is based on the realities of the digital world and aims to tackle the most pressing problems for consumer decision-making.
Friday 3 May 2024
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:
- 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).
- 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).
- 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)
- 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).
Thursday 18 April 2024
Unintentionally becoming an apparent producer - AG Campos Sánchez-Bordona's opinion in Ford Italia (C-157/23)
Photo by Benjamin Scheidl on Unsplash |
As AG Campos Sánchez-Bordona also agrees here with, using Art. 3(1) PLD that is considering Ford Italia as an 'apparent producer' instead of Art. 3(3) PLD, which only allows to hold the supplier liable if they did not timely identify the producer, is what the CJEU should consider here. The referred question asks then whether if the supplier has not physically placed its own name, trader mark or other distinguishing feature on the consumer product, they could be held liable as a producer on the ground that they share in whole or in part the same name, trader mark or other distinguishing feature as the producer. How broad then is the concept of an 'apparent producer'?
AG Campos Sánchez-Bordona advises the CJEU to consider that in the given case not only the producer and the supplier share the same name (which allows the supplier, Ford Italia, to raise consumer confidence, taking advantage of the reputation of Ford brand - para 39) , but that they also belong to the same group of companies, operating under the same emblem (para 50), and that the car bears the trade mark the characterises both companies. As such, the consumer could have considered Ford Italia as presenting itself as a producer, which could lead to their liability under the PLD. '(...) the consumer cannot be expected to discover, by his or her own means, who the (actual) producer is, where that producer is distinct from the supplier which presents itself with those characteristics." (para 41). This according to AG Campos Sánchez-Bordona could lead to to joint and several liability of actual producer and apparent producer (para 48).
The AG Campos Sánchez-Bordona draws parallels to the recent Fennia v Philips case (C-264/21 - with our comment), however, in that case both Saeco and Phillips names were placed on the consumer product, which made the reference to the 'apparent producer' easier. The second invoked case, O'Byrne (C-127/04), made it easier to consider as a producer another company, a distributor, belonging to the same company group. However, there, the distinction with the current case was that in O'Byrne the actual producer could no longer have been sued, due to the time limits having passed.
As AG Campos Sánchez-Bordona mentions in para 31 the given case requires careful weighing of the consumer protection interests, which the broader interpretation of the notion provides, against interests of traders involved in the production and supply chain.
I am not fully convinced whether in the current case the latter should not have prevailed. Considering that the supplier, Ford Italia, promptly identified the actual producer, it seems that the consumer interests could have been protected by national procedural laws allowing either adding to the procedure another party (Ford WAG) or raising a new claim against them. However, holding the supplier liable as an apparent producer under the circumstances of this case may expose suppliers to claims they have not accounted for either by insurance or in their B2B agreements within the production and supply chain. Let's see what the CJEU decides in this case.
Thursday 11 April 2024
May airlines use T&Cs to prohibit passengers from assigning their rights to claim damages? - CJEU in Air Europa Lineas Aéreas (C-173/23)
Ex officio unfairness testing after consumers assigned their claims
First, the CJEU reminds that it has already previously declared (in the DelayFix case - C-519/19) that the UCTD's application is based on the capacity of the parties when they were concluding a contract (B2C) rather than the identity of parties entering into a dispute (paras 17-18). Therefore, the UCTD applies to more cases than just the ones, in which a dispute is between B2C contractual parties (para 25).
The CJEU reminds further that the ex officio judicial mechanism aims to compensate for the imbalance between consumers and professional parties (para 29). Other procedural issues remain in the discretion of the Member States, provided that they comply with the principles of equivalence and effectiveness (para 31).
To comply with the principle of equivalence here, the national court needs to determine whether national law allows it to ex officio assess whether a contractual term is contrary to national rules of public policy. If the answer is affirmative, the unfairness assessment also needs to take place ex officio (paras 34-35). This conclusion is not impacted by the consumer's presence in the judicial procedure, as if conditions for the applicability of the UCTD have been fulfilled (e.g., contract concluded B2C) its provisions benefit from having been assigned an equivalent status to domestic rules of public policy.
The assessment differs regarding the observance of the principle of effectiveness, as this considers the specifics of each procedure and the role that the contested legal provision plays in it. Specifically, " (...) whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, and, where relevant, the principles which lie at the basis of the national legal system, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of proceedings (...)." (para 37). Here then the fact that the procedure occurs between two professional parties weakens the need to provide as much protection against unfair terms, as if a consumer was one of the parties in the dispute, as there should be more balance between parties in the dispute (para 38). The principle of effectiveness does not require then the national court to test unfairness ex officio (para 39), unless the professional assignee of the consumer's claim had no real chance to rely on the unfairness in the procedure (para 40).
Consequences of unfairness in light of audi alterem partem when consumers are not part of the judicial process
When national courts find a term unfair ex officio, they follow the rules of audi alterem partem, of a fair hearing, by apprising parties in the dispute of court's findings and giving them an opportunity to debate these and to be heard (para 44). This applies also in case the dispute is between the assignee of the consumer rights and it is this assignee that needs to be informed of the unfairness finding, alongside the trader (para 46). As the consumer is not a party to the dispute, they do not need to be informed of the court's finding of unfairness and do not need to address it (para 49). It is the assignee of their rights that may object to it instead (para 47), although, obviously, they are unlikely to do so as they would then lose standing in the procedure (para 48).
***
The first part of the judgment has enormous practical relevance, as air passengers commonly assign their rights for compensation to third parties. It is, therefore, important for the effectiveness of passenger protection framework that air carriers could not block this process by prohibiting the transfer of rights in their general terms and conditions. This judgment will help assure this further, following the previous judgment in the DelayFix case (see our comment here), as professional assignees of consumers' claims will be able to raise unfairness of the prohibition of transfer of rights themselves. If this is prohibited or hindered, they could then rely on the breach of the principle of effectiveness and expect national courts to test unfairness ex officio (pursuant to para 40). This way assures more legal certainty than relying on the ex officio unfairness testing due to the principle of equivalence, as it could differ between the Member States whether ex officio testing of measures of public policy was allowed.
Tuesday 2 April 2024
How the CJEU's ruling in C-604/22 may transform online advertising: a closer look at the IAB Europe case
Facts of the case
Image by "storyset" (Freepik) |
The Court has confirmed the key aspects of the DPA’s decision, emphasizing, among other things that:
1. the TC String holds information that pertains to an identifiable user and, thus, qualifies as personal data under Article 4(1) of the GDPR. Even if it doesn't contain any direct factors that allow the data subject to be identified, it does contain the preferences of a specific user relating to their consent to data processing. This information is considered to be related to a natural person (para. 43). If the information in a TC String is linked to an identifier, such as the IP address of the device, it could be possible to create a profile of that user and identify a particular person (para. 44). The fact that IAB Europe cannot combine the TC String with the IP address of a user's device and doesn't have direct access to the data processed by its members is irrelevant. As the Court stated, IAB Europe can require its members to provide it with the necessary information to identify the users whose data is being processed in a TC String (para. 48). This means that IAB Europe has reasonable means to identify a particular natural person from a TC String (para. 49).
2. IAB Europe, together with its members, is considered a 'joint controller' when it determines the purposes and ways of data processing. Why? According to the Court, the TCF framework aims to ensure that the processing of personal data by certain operators that participate in the online auctioning of advertising space complies with the GDPR. Consequently, it aims to promote and allow the sale and purchase of advertising space on the Internet by such operators. It means that IAB Europe has control over the personal data processing operations for its own purposes and, jointly with its members, determines the purposes of such operations (para. 62-64). Moreover, the TCF contains technical specifications relating to the processing of the TC String, such as how CMPs need to collect users' preferences, how such preferences must be processed to generate a TC String, etc. (para. 66). If any of IAB's members do not comply with the TCF rules, IAB Europe may adopt a non-compliance and suspension decision, which could result in the exclusion of that member from the TCF (para. 65). Therefore, the Court concluded that IAB Europe also determines the means of data processing operations jointly with its members (para. 68), so it meets the criteria of a data controller under Article 4(7) of the GDPR. However, this should not automatically make IAB Europe responsible for the subsequent processing of personal data carried out by operators and third parties based on information about the users' preferences recorded in a TC String (para. 74-76).
Vouchers, an acceptable reimbursement? - CJEU in C-76/23 (Cobult)
On March 21, the CJEU published the most recent judgment interpreting provisions of Regulation 261/2004 on air passenger rights in the case Cobult (C-76/23) concerning the possibility of reimbursing passenger's ticket cost through a voucher.
By Lu Lettering from Pixabay |
In this case, TAP Air Portugal invited passengers to fill an online form to claim reimbursement of ticket costs, which would lead to them being immediately compensated in travel vouchers. The online form included conditions of acceptance, with text clarifying that acceptance of a travel voucher precluded further reimbursement claims in other forms. An alternative way of reimbursement was available, if passengers contacted their customer service department and allowed them to examine case facts (paras 8-9).
The CJEU does not exclude a possibility that passengers could have provided a 'signed agreement' in an online reimbursement form. A 'signed' agreement does not need to include the consumer's signature on an online form they are submitting to the air carrier for reimbursement (para 34). However, certain conditions would need to be met. First, passengers need to be able to give their free and informed consent to reimbursement via a travel voucher (para 22). This will require air carriers to provide passengers with "clear and full information on the various means of reimbursement" of ticket costs (para 30). This condition will not be fulfilled if e.g., air carrier (para 32):
- leaves any ambiguity on its website,
- presents partial information,
- writes information in a language that passengers may not be proficient in (e.g. information in this case was given only in English - would this be seen as compliant if many passengers were Portuguese-speaking?), or
- if the procedure for claiming monetary payment is unfair if compared to the procedure of claiming travel vouchers e.g. because it contains additional steps.
"(...) the addition of such supplementary steps is liable to render reimbursement by a sum of money more difficult to obtain, and thus to upset the relationship between the two means of reimbursement" (para 33) - this is an interesting conclusion by the CJEU, which follows recent developments in other areas of EU consumer law. For example, when assessing fairness of cancellation process of online subscriptions, we would also check whether there were additional steps included, which made the process more complex than when subscription was concluded.
Wednesday 13 March 2024
1st European Conference of the International Association of Consumer Law (IACL)
Good news for European consumer law enthusiasts: The First European Conference of the International Association of Consumer Law (IACL) will take place this September (17-18) in Cambridge, UK, on the topic of "Global challenges for consumer law and policy in contemporary Europe". The event will also honour the work of Prof. Iain Ramsay. There will be 3 streams devoted to 'Digital environments', 'Financial services' and 'Sustainable consumption'. Looking forward to meeting many colleagues in Cambridge this fall!
Details of the call for papers may be found at this website.