EU Member States may impose more consumer-friendly laws than are contained in Unfair Terms Directive – Caja de Ahorros v Associacion de Usuarios de Servicios Bancarios, European Court of Justice

The Unfair Terms Directive states that certain terms in standard business-to-consumer contracts are unfair if they are not in plain language or if they are unfair on consumers. That Directive has been implemented across the European Union by individual Member States. In the UK, it was implemented by the Unfair Terms in Consumer Contracts Regulations 1999. There is an exemption in the Directive under which, as long as the issue is described in plain language, the fairness test does not apply to core terms such as price.

In this particular case, Caja de Madrid, a Spanish mortgage lender, had a contract term saying that interest would be rounded up to the nearest quarter of a percentage point. Ausbanc, a consumer group, argued that the term was unfair. The matter went to the highest Spanish court. Caja de Madrid said that it was a core term and so should not be assessed for fairness, but Ausbanc countered that the Spanish laws implementing the Directive had not made that proviso and so it could be assessed.

The question was whether Spanish laws could bring the Directive into law in a more consumer-beneficial way than was provided for under the Directive. The European Court of Justice said that it could. That Directive was one that ensured consumers had minimum rights, but there was nothing to stop each country from increasing the benefit for consumers by the way they implemented the laws. The UK implemented the Directive with the exemption, so the consumers would be unable to challenge it here. However, the case is interesting if the Government ever wants to change English law to give consumers more protection. A key reason for the banks winning their high-profile bank charges case a few months ago was that those terms were core to the bargain and so could not be challenged under English law.