If an EU consumer wants to cancel a mortgage contract denominated in a foreign currency and tainted by an unfair conversion rate clause, it is not up to a national judge to substitute national case law for the unfair clause: under EU law, the contract is null and void, the Court of Justice of the EU ruled on Thursday 8 September.
In a preliminary ruling (Joined Cases C-80/21 to C-82/21), the Court thus replies to the Warsaw-Śródmieście District Court, which asked it about the interpretation of EU law protecting consumers from unfair terms in consumer contracts, following actions brought before it by several Polish consumers.
These Polish consumers took out mortgages denominated in Swiss francs (CHF) and made available to them in Polish zlotys (PLN) with the purchase rate of CHF to PLN used as the conversion price. However, when the monthly mortgage payments were made, the conversion price corresponded to the selling rate of the CHF against the PLN.
In their actions in Poland, these consumers wanted to have the unfairness of the terms relating to this conversion mechanism, which were an integral part of their respective loan contracts, declared in court.
By its reference for a preliminary ruling, the Polish court wanted to know whether EU law (Directive 93/13/EEC, as amended by Directive (EU) 2019/2161) precludes national case law according to which the national court may, after finding that an unfair term contained in a consumer contract is null and void, which leads to the nullity of the contract as a whole, substitute the nullified term, either by interpreting the will of the parties or by applying to the nullified unfair term a provision of national law of a suppletive nature, even though the consumer does not wish to maintain the validity of the contract.
The Polish court also wanted to know whether, in the context of removing an unfair term, the national court can limit itself to removing only the unfair part of the term. In addition, it wanted clarification of the starting point of the limitation period for the consumer’s right to reimbursement following the removal of an unfair term.
The Court considers that the EU Directive does not allow a judicial interpretation to be substituted for an annulled unfair term, as national judges are only required to set aside the application of an unfair term, without being empowered to review its content.
It states that where the consumer has been informed of the consequences of cancelling the contract as a whole and has consented to such cancellation, it does not appear that cancelling the contract as a whole would expose the consumer to particularly detrimental consequences. However, it is only under this exceptional condition that a court may substitute a national provision of a suppletive nature for an unfair term that has been annulled.
Furthermore, the Court of Justice of the EU notes that the directive precludes national case law allowing the national court to remove only the effectively unfair part of a term.
Finally, the Court found that a limitation period may be compatible with EU law only if the consumer had the opportunity to know their rights before that period began to run or expired.
In this case, the Court argues, setting a limitation period against a claim for repayment would not offer the consumer effective protection, given that the consumer had begun to repay his loan before the unfair term was removed, and was unaware of its unfairness.
See the judgment of the Court of Justice (in French): https://aeur.eu/f/2zt (Original version in French by Aminata Niang)