REQUIRING A CONSUMER TO BEAR AN UNREASONABLE COST ASSOCIATED WITH A LOAN, DISTINCT FROM INTEREST, MAY CONSTITUTE AN UNFAIR TERM.

#108Requiring a consumer to bear an unreasonable cost associated with a loan, distinct from interest, may constitute an unfair term

Three citizens in Poland entered into consumer loan agreements which stated that they would pay additional fees and commissions in addition to the amount borrowed plus interest. These fees and commissions can be considered as costs associated with the loan, but they are different from interest and are very high and correspond to several tens of percentage points of the amounts borrowed. Further, in some of these contracts there were provisions that the loan repayments were payable exclusively in cash to the lender's sales representative at the borrower's place of residence.

Consumers thus pointed to the inflated and unreasonable nature of these costs. They also asked the court in Poland to declare the terms in question in the provisions of the Loan Agreement unfair.

A court in Poland asked the Court of Justice to interpret Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts and whether terms relating to the costs of a loan, other than interest, can be regarded as unfair merely because those costs are manifestly disproportionate in relation to the consideration given by the seller or supplier.

The Court of Justice has held that a contractual term may be regarded as unfair if it causes a significant imbalance in the rights and obligations of the parties to the contract to the detriment of the consumer. The unfairness of terms can be assessed only if they do not purport to define the main object of the contract or do not relate to the reasonableness of the price or remuneration in relation to the services provided as consideration. It is for the referring court to ascertain whether that is the case in the present case. If the answer is in the negative, the national court will have to examine whether the national legislation, as legislation providing for a higher level of protection, makes it possible to make such an assessment.

The national court may thus declare the contractual term under which compensation is to be paid at the consumer's place of residence to be void on the ground that it allows the loan provider to exert unlawful pressure and the contract may therefore prove to be unenforceable and therefore void in its entirety.

However, if the unfair part of the term is severable from the rest of the term, removal may be sufficient to restore a genuine balance between the parties. In such a case, the contract may continue to exist and the consumer may choose any method of payment among those available under national law.

In conclusion, we submit that an imbalance in the rights and obligations of the parties to the contract to the detriment of the consumer may arise from the mere fact that the costs, other than interest, borne by the consumer are manifestly disproportionate in relation to the amount borrowed and to the services provided in return for the granting and administration of the loan, and may thus be considered void. If it is possible to separate this condition from the remaining conditions, the loan agreement may exist and be considered valid. The loan agreement will only be void to the extent that it contains an unfair term.