Brussels, 17/10/2014 (Agence Europe) - If a national court determines that a contract contains unfair terms, such as an excessively high rate of interest on arrears, it should remove them in order to protect the consumer and not seek to amend them, stated Advocate General Nils Wahl before the Court of Justice of the EU on Thursday 16 October with regard to a number of joined cases (C-482/13, C-484/13, C-485/13 and C-487/13) involving two Spanish banks.
In a case being heard by a court in Spain, the Spanish banks Unicaja Banco and Caixabank lodged requests to seize the properties of people no longer able to repay their mortgages. The judge noted that the contracts in question contained unfair clauses, relating to the rate of default interest and application of this rate in the event of early repayment.
A Spanish law allows the judge to call on the bank to recalculate the rate of default interest. But can he do so when this rate is deemed excessive? Does this not run counter to the directive on unfair terms in consumer contracts (93/13/EEC)? These were the questions put by the Spanish judge, seeking the assistance of the Court.
The Advocate General said that there is no room for doubt in interpretation of the directive: any unfair terms in a contract must be completely removed, it cannot tie the consumer in. The same is true when the bank proposes to recalculate the terms to remove the unfairness. Thus, a national court should not accept that an initially unfair rate of default interest be reduced in order to bring it into line with the legal ceiling. The contract may remain valid, if it can stand without the unfair clause.
When delivering his opinion, Advocate General Wahl was informed by the Spanish government that the law which allows a bank to adjust the rate of default interest only related to situations where this rate is not deemed excessive. If this were, indeed, the case - and it is for the referring court to determine one way or the other - this law would be compatible with the directive, said the Advocate General. (JK)