Joined Cases C‑96/16 and C‑94/17

Banco Santander SA v Mahamadou Demba and Mercedes Godoy Bonet

and

Rafael Ramón Escobedo Cortés v Banco de Sabadell SA

(Requests for a preliminary ruling from the Juzgado de Primera Instancia no 38 de Barcelona and the Tribunal Supremo)

(Reference for a preliminary ruling — Directive 93/13/EEC — Unfair terms — Scope — Assignment of debts — Loan agreement concluded with a consumer — Criteria for assessing the unfairness of a contractual term setting the default interest rate — Consequences of that unfairness)

Summary — Judgment of the Court (Fifth Chamber), 7 August 2018

1. Consumer protection—Unfair terms in consumer contracts—Directive 93/13—Scope—Business practice in assigning or purchasing a consumer’s debt—Absence of a framework for that practice in the contractual terms—Inapplicability of the directive—Exclusion provided for contractual terms reflecting mandatory statutory or regulatory provisions—Absence of contractual terms amending the effect or ambit of the national provisions—Inapplicability of the directive

   (Council Directive 93/13)

2. Questions referred for a preliminary ruling—Admissibility—Limits—Clearly irrelevant questions and hypothetical questions put in a context not permitting a useful answer

   (Art. 267 TFEU)

3. Questions referred for a preliminary ruling—Jurisdiction of the Court—Limits—Interpretation of national law—Precluded

   (Art. 267 TFEU)

4. Consumer protection—Unfair terms in consumer contracts—Directive 93/13—Finding that a term is unfair—Scope—Non-negotiated term in a loan agreement setting the default interest rate—National case-law establishing an irrebuttable presumption that such a term is unfair on the ground that the sum of the compensation is disproportionate—Lawfulness

   (Council Directive 93/13, Arts 3(1) and 8)

5. Consumer protection—Unfair terms in consumer contracts—Directive 93/13—Finding that a term is unfair—Scope—Revision by the national court of the content of an unfair term—Unlawfulness

   (Council Directive 93/13, Art. 6(1))

6. Consumer protection—Unfair terms in consumer contracts—Directive 93/13—Finding that a term is unfair—Scope—Non-negotiated term in a loan agreement setting the default interest rate—National case-law providing for the total elimination of default interest, while ordinary interest continues to run—Lawfulness

   (Council Directive 93/13)

1.  Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted, first, as not applying to a business practice consisting in assigning or purchasing a consumer’s debt, without any provision for such an assignment having been made in the loan agreement concluded with the consumer, without giving the consumer prior notice of that assignment, without his consent and without giving him the opportunity to buy back and thereby extinguish his debt by reimbursing to the assignee the price it paid in respect of that assignment, plus the applicable interest, expenses and costs. Secondly, that directive does not apply to national provisions, such as those contained in Article 1535 of the Código Civil (Civil Code) and Articles 17 and 540 of Ley 1/2000 de Enjuiciamiento Civil (Civil Procedure Code) of 7 January 2000, which regulate that opportunity to buy back a debt and govern the replacement of the assignor by the assignee in ongoing proceedings.

   (see para. 47, operative part 1)

2.  See the text of the decision.

   (see paras 50-53)

3.  See the text of the decision.

   (see para. 57)

4.  Directive 93/13 must be interpreted as not precluding national case-law, such as that of the Tribunal Supremo (Supreme Court, Spain) at issue in the main proceedings, whereby, in a loan agreement concluded with a consumer, a non-negotiated term fixing the default interest rate applicable is unfair, on the ground that the consumer who is late performing his payment obligation is required to pay a disproportionately high sum in compensation, where that rate exceeds by more than two percentage points the ordinary interest rate provided for in that agreement.

   In that respect, as the Advocate General notes in essence in paragraph 60 of his Opinion, it cannot be excluded that, in their role of ensuring consistency in the interpretation of the law, and in the interests of legal certainty, the supreme courts of a Member State, such as the Tribunal Supremo (Supreme Court), may, in compliance with Directive 93/13, elaborate certain criteria in the light of which the lower courts must examine the unfairness of contractual terms. The case-law of the Tribunal Supremo (Supreme Court) at issue in the main proceedings admittedly does not appear to come within the ambit of the stricter measures which may be adopted by the Member States in order to ensure a higher level of protection for consumers pursuant to Article 8 of that directive, given, in particular, that –– as stated by the Spanish Government at the hearing before the Court –– that case-law does not appear to have the force of law or constitute a source of law in the Spanish legal order. However, the fact remains that the development of a criterion derived from case-law, such as that identified in the present case by the Tribunal Supremo (Supreme Court), is wholly consistent with the objective of consumer protection pursued by that directive. It follows from Article 3(1) of Directive 93/13 and from the general scheme of the directive that the latter does not so much aim to guarantee an overall contractual balance between the rights and obligations of the parties to the agreement as to prevent an imbalance between those rights and obligations from arising to the detriment of consumers.

   (see paras 68, 69, 71, operative part 2)

5.  See the text of the decision.

   (see paras 73, 74)

6.  Directive 93/13 must be interpreted as not precluding national case-law, such as that of the Tribunal Supremo (Supreme Court) at issue in the main proceedings, whereby the consequence of the unfairness of a non-negotiated term fixing the default interest rate in a loan agreement concluded with a consumer consists in the complete elimination of that interest, while the ordinary interest provided for in that agreement continues to run.

   In particular, it does not follow from that directive that the setting aside or annulment of the term in a loan agreement fixing the default rate of interest, on the ground of the unfairness of that term, should also bring about that of the term in that agreement fixing the ordinary rate of interest, particularly as those different terms must be clearly distinguished. In the latter respect, the point should be made that, as is apparent from the order for reference in Case C‑94/17, default interest is intended to penalise the debtor’s failure to fulfil his obligation to make the loan repayments on the dates agreed contractually, to deter the debtor from falling behind in the performance of his obligations and, where appropriate, to compensate the lender for the loss suffered as a result of a late payment. By contrast, the function of ordinary interest is one of remuneration for the lender making a sum of money available until that sum has been repaid. As the Advocate General notes in point 90 of his Opinion, those considerations apply regardless of the way in which the contractual term determining the default interest rate and that fixing the ordinary rate of interest are worded. In particular, they apply not only when the default interest rate is fixed independently of the ordinary interest rate, in a separate contractual term, but also when the default interest rate is fixed in the form of an increase in the ordinary interest rate by a certain number of percentage points. In the latter case, as the unfair term consists in that increase, Directive 93/13 requires solely that that increase be annulled.

   (see paras 76, 77, 79, operative part 3)