Recent judgment of the ECJ on Consumers’ Rights and Protections for Foreign Currency Loans
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On 8 September 2022, under the European Union’s (EU) Unfair Contract Terms Directive, it was held that the application of national case law was forbidden, as replacing an unfair term with a supplementary national provision would likely expose the consumer to harsher circumstances.
Background Information:
The case concerned actions brought by consumers before the District Court of Warsaw, in relation to the conversion price clauses contained in mortgage loans denominated in foreign currency (CHF to PLN), which were considered to be unfair. The court had to ascertain whether the application of national case law would be permitted after having found that the contract would be void in its entirety.
Decision
The ECJ, in Joined Cases C-80/21 to C-82/21, held that if an unfair term was declared void and replaced by a supplementary national provision, the national court would be obliged to declare the contract void in its entirety, as a supplementary provision would likely expose the consumer to even harsher consequences. The court directive did not permit the application of national case law and did not allow the national court to replace a void unfair term with a supplementary national law provision. The national court is only required to set aside the application of an unfair term, but not to revise its content. It was determined that a contractual term, must be removed in its entirety, as removing part only, may change the substance of the content.
Lastly, the European Court held that a limitation period relating to the consumer’s rights was consistent with Union law only if the consumer was aware of their rights before the limitation expired, with Union law precluding national law.
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