Given that the problem of abusive clauses in loan contracts is currently at the forefront of public debate in Romania, as well as in other European States, I believe it is a subject of interest to analyse the conduct of the banks in Romania who have abusive clauses. My analisys is based on the decisions of the European Court of Justice in this matter, and the interpretation of the European rules in this situation.
Consumer protection is integrated among the principles that define the default action of the European Union (Article 169, Treaty on the Functioning of the European Union - TFEU) and the subsidiarity principle, so that a minimal harmonization of the legal system, providing a high level of protection for consumers will reduce the diferences between all European legal systems.
Within the European context, the legislator (by means of Directive 2011/83/UE, Directive 2008/48/CE and Directive 93/13/CEE) wanted to harmonize at the European Union level all national laws establishing direct and indirect criteria for determining the situation in which consumer rights are considered to have been violated (Howells, Reich, 2009). This goal was desired to be achieved by increasing transparency and giving the consumers a set of clear and understandable pre-contractual information, in a standardised form used by all the financial institutions.
The most important regulations in this domain are Directive 1993/13/CEE on uunfair terms in consumer contracts, Directive 2008/48/CEE on loan agreements for consumers, and Directive 2009/22/CE on injunctions for the protection of consumers' interests. The European pieces of legislation were transposed into Romanian law by the Government Emergency Ordinance 50/2010 on loan agreements with consumers. The most recent piece of legislation that has not been yet implemented is Directive 2014/17/EU on loan agreements for consumers relating to residential immovable property.
For instance, the European Directive 1993/13/CEE, whose provisions were transposed into Romanian legislation by Law 193/2000, defines abusive clauses as being those contractual clauses which have not been negotiated directly with the consumer, and will be considered abusive if by themselves or together with other provisions generate disadvantage for the consumers and, in a manner contrary to good faith, a significant imbalance between the rights and obligations of the parties (Goicovici, 2007, p. 71). Based on this definition, I observe that the most frequent problems in loan agreements refer to unilateral increase in interest rates (Civil Sentence no. 12470, October 28, 2011), risk and account administration fees (Civil Sentence no. 12014, October 14, 2011), and clauses providing for the extension of mortgage in favour of the bank.
Court actions are usually individual actions, but there have also recently appeared class actions, which are considered questionable by the courts in terms of procedural guarantees. The issue is raised in terms of evidence. In class actions, the court usually takes into account documents (loan agreements), while in individual actions the courts also proceed to direct hearing of the claimant. This is very important because it offers the court the possibility to correctly assess the facts.
The biggest problem for the consumers is that the bank has the possibility to appreciate discretionarily when financial imbalance occurs in the market. The consequence is the modification of the contract terms without any real negotiation between the parties. Furthermore, if the consumers do not agree with these terms, the banks notify them to pay back in advance the money (ECJ, Kušionová v. SMART Capital a.s, 2014) within 30 days. Analysing the conduct of the banks in Romania, parting from the decisions which I mentioned, it seems that they try to convince the consumers to waive their claims by offering a reduction of interests form 4-5% to 10-12%. This practice is seen as a poisoned apple because the banks may increase again their interest rates.
Romanian courts (Civil Sentence no. 966, 2013, Târgu Mureș Courthouse, Civil Sentence no. 11608, 2010, Bihor Tribunal Civil, Sentence no. 741, 2013, Cluj Court of Appeal) deem abusive the clauses which offer the financial institutions the power to modify the interest rate (Civil Sentence no. 230, 2014 Galati Courthouse) and clauses that include set up fees and risk management fees. In a recent ECJ decision, Kasler v. OTP Bank Jelzalogbank Zrt, 2013, which refers to a loan contract in Swiss francs, the Court ordered the ’freezing’ of the exchange rate at a historical rate. The Court of Justice of the European Union appreciates that when a consumer contract is concluded, the consumers must be able to assess the economic consequences in the loan contracts so that the national court can bowdlerise the abusive clause and restore the order. The national and European legislator wanted in certain cases to alleviate the pacta sunt servanda principle (i.e. agreements must be kept), and give the possibility to the national courts to compel the banks to either modify or invalidate the clauses if they are abusive (ECJ, Oceane Editorial SA v. Rocio Murciano Quintero, 2000).
On the other hand, judgments of the ECJ are based on the idea that the consumers are in a position of inequality in relation to financial institutions when it comes to power of negotiation and awareness. This situation leads to concluding the agreement and accepting pre-drafted terms established by banks alone (ECJ, Krajský súd v Prešove – Slovacia, 2010). The German Supreme Court surprisingly stated that a sign of unfairness in a standard clause consists in the ability of the clause to be returned in favor of who required it. In Croatia, for example, the national courts decided that the banks have to transform Swiss francs mortgage loans in national currency.
What do banks plead in their defense?
1. That the court is not allowed to modify the price of the product, an essential element of the contract that was accepted by the consumer.
2. That the consumer signed the contract, so they have assumed all the clauses and terms of the contract.
Nevertheless, the national courts decisions that took shape lately tend to protect consumers just like we see in ECJ decisions (Pereničová și Perenič, 2010), offering a high degree of protection, emphasising that these unfair terms are not binding on the consumers because those clauses are contrary to good faith and cause imbalance between the rights and obligations of the parties.
To draw a conclusion, in my opinion, these abusive clauses in loan agreements must be eliminated even in cases where the consumers have not denounced them yet. The economic imbalance between consumers and banks is obvious and the lack of predictability of consumers is seriously affected. The financial institutions’ second argument does not hold because every time when a contract has an abusive clause, it remains without effect, the national legislation allowing courts to declare the nullity of that clause. Furthermore, in contracts of adhesion, the consumers have no option but to adhere to the contract, negotiation being impossible. So, I believe it is necessary to eliminate all the abusive clauses and ensure predictability of the contracts if we want to protect the consumers.