Control of unfair terms in consumer credit agreements

By a judgment of 13 March 2025, the CJEU ruled on the applicability of the review of unfair terms within a consumer credit agreement.   

In the context of this case, consumer loans were concluded between two financial companies under Bulgarian law and natural persons for amounts of up to BGN 1,700 (or 870 euros), repayable in instalments over periods of up to 18 months.

Pursuant to these contracts, the borrowers had to provide a security that could take different forms, such as in the form of a guarantee with a company specializing in this activity, chosen or approved by the lender.

The Bulgarian referring court questions a dozen preliminary questions, but it will be precisely considered whether the choice of the guarantor by the lender, imposed by the lender, can be considered as an unfair or aggressive commercial practice in all circumstances, within the meaning of Directive 2005/29, and, if not, the referring court questions its ability, in the context of a non-adversarial procedure, to find the unfairness of a contractual clause in consideration only of a serious doubt on this point.

With regard to the first question, the Court of Justice of the European Union answers in the negative by making a combined reading of Article 8 of Directive 2005/29, read in conjunction with Article 5 (5) and Annex I of that directive, considering that these provisions must be interpreted as meaning that the inclusion in credit agreements of a clause by which the consumer must conclude a contract of guarantee with a person chosen by the creditor does not constitute an aggressive commercial practice in all circumstances, since this practice is not included in the list provided for in Annex I to Directive 2005/29 (paragraphs 71 and 72) .

 With regard to the second question, the referring court asks, in essence, whether Article 6 (1) of Directive 93/13 must be interpreted as meaning that the national court may of its own motion rule out the application of a clause in the consumer credit contract concluded between that consumer and the trader concerned, solely on the basis of the existence of a doubt as to whether that clause could have been accepted by the consumer as a result of an unfair commercial practice, within the meaning of Article 5 of Directive 2005/29, or whether the existence of that practice must be established with certainty.

To answer this question, the CJEU recalls that the finding of the unfairness of a commercial practice is only one element among others on which the competent court may base its assessment of the unfairness of the terms of a contract. Indeed, it is only required that the judge rule by assessing the general criteria provided for in Articles 3 and 4 of Directive 93/13.

As a reminder, Article 3 of the Directive provides that “a non-negotiated term is deemed to be unfair when it creates a significant imbalance between the rights and obligations of the parties arising from the contract to the detriment of the consumer”. 1 . Without prejudice to Article 7 , the unfairness of a contractual term shall be assessed , taking into account the nature of the goods or services for which the contract was concluded and by referring , at the time of conclusion of the contract , to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent .Consequently, the CJEU accepts that in order to qualify as abusive a clause contained in a contract concluded between a consumer and a trader, it is in no way necessary to establish the existence of an unfair commercial practice. Nevertheless, the existence of a doubt in this regard remains an element likely to be taken into consideration when examining unfairness. In any event, the CJEU specifies that if the judge wishes to rule out the application of a clause, which he considers to be abusive, its abusive  nature must be established and cannot be based on a simple doubt (paragraph 76). Thus, the national court cannot rule out ex officio the application of a clause in the consumer credit contract concluded between a consumer and a professional, if it is not convinced that this clause must be qualified as “abusive“, within the meaning of Article 3 (1) of Directive 93/13.

Thus, through this case law, the CJEU enshrines the principle that a clause imposing security may be analysed in the light of unfair terms, by assessing the only significant imbalance between the rights and obligations of the parties, without it being necessary for this clause to be previously qualified as an unfair or aggressive commercial practice, provided that the unfairness of the latter is established.

References: Court of Justice of the European Union, 10th Chamber, Judgment of 13 March 2025, Case No. C-337/23