Case C-453/10- Jana Prenicova, Vladislav Perenic V SOS finance: the protection of the consumer.
Case C-453/10- Jana Prenicova, Vladislav Perenic V SOS finance spol.sr.o (Slovakia) : rules that national legislation may provide for a contract between a consumer and a trader which contains an unfair term to be void, if that ensures better protection of the consumer.
Background
In March 2008, Mr and Mrs Perenic concluded a credit agreement with SOS finance spol. Sr.o (‘SOS’), an establishment which grants consumers loans. SOS granted applicants a loan repayable in several instalments but the annual percentage rate (‘APR’) fixed in the agreement was lower than the actual rate charged. As a result, the applicants sought to declare void the credit agreement they had signed with SOS.
The national court considered the credit agreement contained some unfair terms which were disadvantageous for the applicants. The court concluded that it would be more advantageous for the applicants if the agreement was declared void in its entirety rather than maintaining the validity of the ‘non-unfair’ terms in the agreement.
SOS appealed to the Okresny sud Presov (District Court, Presov) which in turn sought a preliminary ruling from the Court of Justice of the European Union (‘ECJ’).
The Law
The relevant laws were the provisions of Council Directive 93/13/EEC of 5 April 1993 which prohibits unfair terms in consumer contracts as well as Directive 2005/29/EC of the European parliament and of the Council of 11 May 2012 concerning unfair business-to-consumer commercial practices in the internal market.
Judgment of the Court
The Court referred the following questions to the ECJ: (a) whether a national court can declare an agreement containing unfair terms to be entirely void if that ensures better protection for the consumer; (b), where a lender quotes an ARP lower than the actual interest charged whether this should be regarded as an unfair commercial practice.
In relation to the first question, the ECJ noted the provisions of Article 6(1) of Directive 93/13 which states that a consumer’s contract containing unfair terms will not be void as a whole but the unfair terms will not bind the consumer. The aim of the legislation is to restore the balance between the parties and to preserve the validity of the contract as a whole. According to the ECJ, in order to respect the legal certainty of economic activities, it is not appropriate to reach a decision on the basis of a possible advantage for one of the parties.
However, under the terms of Directive 93/13, Member States are permitted to give consumers a higher level of protection than provided for under the Directive. Accordingly, a national court can declare void under national laws a consumer contract containing unfair terms.
In relation to the second question, the ECJ considered that indicating in a credit agreement an APR lower than the real rate constituted false information as to the total cost of the credit. The ECJ considered this element must be regarded as a “misleading” commercial practice under Article 6(1) of Directive 2005/29/EC.
The ECJ considered that an unfair commercial practice was one factor that a court could use to assess the fairness of contractual terms but it did not mean that the contested terms were automatically unfair. The national court had to determine if the provisions of Directive 93/13 could apply to this kind of “misleading” commercial practice.
Conclusion
The case confirms that where a consumer contract contains unfair terms, such terms will be void and unenforceable, however, the remainder of the contract will be valid. National laws may impose stricter more consumer-biased rules. Misleading provisions in an agreement may constitute unfair commercial practices which will be unlawful and give rise to penalties for the business engaging in such practices, and may also constitute unfair terms and as such be void.
Amandine Yaher