The transparency of ‘floor’ clauses in mortgage loans may be reviewed in the context of a collective action against the entire banking system of a Member State of the European Union, ruled the Court of Justice of the EU in a judgment handed down on Thursday 4 July (Case C-450/22).
In Spain, the Spanish Association of Users of Banks, Savings Banks and Insurance (ADICAE) brought a collective action against 101 financial institutions operating in the country to remove so-called ‘floor’ clauses from mortgage contracts.
These clauses stipulate that, even if the reference interest rate falls below a certain ‘floor’ defined in the contract, the consumer continues to pay interest equivalent to this threshold without benefiting from a lower rate.
The Spanish Supreme Court ruled that these clauses were unfair but, to avoid harmful consequences for the Spanish economy, decided to limit the effects of their nullity in time. The CJEU ruled against this limitation on the grounds of consumer protection (see EUROPE 11694/17).
Referred to again by the Spanish Supreme Court, the CJEU is asked whether it is possible, in the context of a collective action, to review the transparency of the disputed terms in the light of Directive 93/13 on unfair terms in consumer contracts.
In its judgment, the CJEU notes that the Directive does not preclude judicial review of transparency in the context of collective action. That review must be adapted to the specific features of collective actions and focus on the standard contractual and pre-contractual practices followed by the seller or supplier with regard to the average consumer.
The Court points out that, in this case, the two conditions for bringing a collective action against several professionals are met: - the action is brought against professionals in the same economic sector; - the ‘floor’ clauses seem similar, although they were concluded at different times and under different rules.
Next, the European Court emphasises that the heterogeneity of the public concerned makes it necessary to have recourse to the figure of the ‘average consumer’, whose overall perception is relevant for the purposes of the review of transparency. As this perception may have changed, the Spanish Supreme Court will have to ascertain whether the collapse in interest rates, which was characteristic of the 2000s, or whether its 2013 judgment finding that ‘floor’ clauses were not transparent, have led to a change, over time, in the average consumer’s level of attention and information at the time when a mortgage loan agreement was concluded.
To see the Court’s judgment: https://aeur.eu/f/cy8 (Original version in French by Mathieu Bion)