Since the beginning of the first decade of the 21st century, banks in Poland granted consumers numerous mortgage loan contracts linked to Swiss francs. These mortgage loans were in high demand at the time because they allowed borrowers to benefit from considerably lower interest rates compared to those of the local currency, the Polish Slotis (PLN).
The global financial crisis caused the exchange rate between the CHF and the PLN to depreciate, and many borrowers sued the banks on the grounds that the conversion clauses were abusive.
In the context of one of these disputes, the Warsaw District Court referred the following question to the European Court of Justice: Can the parties to a mortgage loan contract between a consumer and a bank, which has been declared void in its entirety due to the inclusion of an unfair term, pursue claims going beyond the reimbursement of the monetary payments made under that contract and the payment of default interest, at the statutory rate, accrued from the date on which payment was required? The parties to a mortgage loan contract between a consumer and a bank, which has been declared void in its entirety due to the inclusion of an unfair term, may pursue claims going beyond the reimbursement of the monetary payments made under that contract and the payment of default interest, at the statutory rate, accrued from the date on which payment was required?
The CJEU in a recent Judgment of 15 June 2023, has answered this question by analysing the main proceedings, the question referred for a preliminary ruling and the merits of the case on the basis of European law, which we will analyse below.
Case and dispute in the main proceedings
In July 2008, a Polish couple entered into a mortgage loan agreement with a bank. The contract stipulated that the monthly instalments were to be paid in Slotis after converting the amount according to the exchange rate to the Swiss franc applied by the bank.
On 31 May 2021, the husband filed a lawsuit against the bank claiming payment of approximately EUR 800, plus default interest at the statutory rate. The plaintiff argued that the mortgage loan contract contained abusive clauses that rendered it invalid, which meant that the bank in question had received the monthly loan instalments without a legal basis. According to the bank, the complaint filed should be dismissed as unfounded, since the mortgage loan in question did not contain unfair terms, and is therefore valid, and in any event, if the invalidity of the contract is confirmed, it would be the bank that would be entitled to claim.
On the merits of the case
Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts
Directive 93/13 establishes a system of protection for consumers in contracts with professionals. According to EU case law, consumers are in a situation of inferiority compared to professionals in terms of bargaining power and information, which leads them to accept pre-established conditions without influencing their content.
To address this inequality, the Directive obliges Member States to establish a mechanism for assessing the possible unfairness of non-individually negotiated terms under the principle of proportionality, and imposes the obligation to provide effective means to prevent the use of unfair terms, with national courts having to determine whether a term complies with the requirements of good faith, balance and transparency set out in the Directive.
Analysis of the question referred for a preliminary ruling in Case C-520/21
In the specific case, the court asked whether Articles 6(1) and 7(1) of Directive 93/13 preclude a judicial interpretation of national law which allows the consumer to claim compensation in excess of the reimbursement of the monthly instalments paid and the costs paid under the contract, as well as the payment of interest for late payment, and whether they preclude the credit institution from being able to claim compensation from the consumer in excess of the reimbursement of the capital transferred and the interest for late payment.
The CJEU points out that when an unfair term is declared null and void, it is deemed never to have existed and cannot produce effects vis-à-vis the consumer, therefore, the declaration of unfairness of a term must restore the situation in which the consumer would have found himself if that term had not existed, which implies the restitution of the advantages unduly obtained by the professional. In view of the legal principle “nemo auditur propriam turpitudinem allegans“, a party cannot derive any economic benefit from a situation created by its own wrongful conduct. If a bank suffers any disadvantage resulting from the annulment of a mortgage loan contract containing unfair terms, it should not be compensated for that disadvantage, in so far as it arises exclusively from its own wrongful conduct.
If a bank were permitted to pursue claims against a consumer which go beyond the repayment of the principal sum of the loan plus interest for late payment at the statutory rate, that would deprive Directive 93/13 of its effectiveness and would not be in accordance with its objectives, thereby undermining the deterrent effect which the Directive seeks to give to the finding of unfair terms in contracts concluded between consumers and professionals.
The CJEU concludes that, in the context of the total annulment of a mortgage loan contract due to unfair terms, Directive 93/13 does not preclude an interpretation of national law which allows the consumer to claim compensation which goes beyond the reimbursement of the monthly instalments and costs paid, as well as the payment of interest for late payment, provided that the objectives of the Directive and the principle of proportionality are respected.
Conclusions
We see, therefore, that with this judgment, the CJEU seeks to strengthen the rights of consumers in the area of mortgage lending, giving them the possibility to obtain fair compensation in cases of unfair terms and thus promoting more transparent and fairer practices in the EU banking sector.
The CJEU ruling opens the door for those affected by unfair terms in their mortgages, whose contracts have been annulled for this reason, to be able to claim additional compensation beyond the refund of the corresponding instalments and late payment interest, which is why at the law firm Navas & Cusi, experts in Banking Law and European Union Law, we will advise you in the best way in the field of mortgage loans, and we will accompany you especially in the processing of claims.
