Judgment;Summary — ECLI:EU:C:2021:480
Date: 2021-06-10
Language of the case: Slovak
Court formation: Seventh Chamber
Subject matter: Principles, objectives and tasks of the Treaties;Consumer protection;Fundamental rights;Charter of Fundamental Rights
Procedure: Reference for a preliminary ruling
Origin: Slovakia

Summary of the facts 
1. HD is the breadwinner of a family of four (consisting of him, his partner and two 
minors). After the birth of his child, HD’s only income was the temporary 
newborn care allowance (maternity benefit) of EUR 746 per month. This was the 
only income that HD obtained, and only temporarily — until October 2019. HD 
assumed that after the benefit ceased, he would receive a minimum wage of 
EUR 550 for his work.  
2. HD was unable to repay his loans, the cost of servicing which was around 
EUR 500 per month. In order to settle his debts, he took out a new loan from 
Prima Banka Slovensko, a.s. (‘the bank’). That loan is the subject of this case. On 
17 June 2016, the bank granted to HD a consumer loan of EUR 5 700 (‘the loan’) 
bearing an interest rate of 7.90%, and HD undertook to repay the loan in 
96 monthly instalments of EUR 80.68 each. 
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3. HD made payments under the loan until August 2017; in September 2017, he 
made only a partial payment. In total, he repaid EUR 1 162.60, of which the bank 
counted EUR 616.21 towards repayment of the loan. 
4. On 28 December 2017, as a result of the borrower’s default, the bank declared the 
outstanding loan amount immediately due and payable. The bank informed HD 
that he should repay the entire loan forthwith, and then brought an action against 
HD for payment of: 
I. the outstanding principal of EUR 5 083.79; 
II. remaining interest for the period until the loan was made immediately due 
and payable, amounting to EUR 137.80; 
III. default interest for the period until the loan was made immediately due and 
payable, amounting to EUR 2.21; 
IV. penalty interest of 5% on the outstanding loan amount of EUR 5 083.79 for 
the period from the time the loan was made immediately due and payable 
until the remainder of the loan is fully repaid; 
V. insurance fees amounting to EUR 3.96; 
VI. default interest of 5% on the outstanding interest to be paid of [EUR] 137.80 
for the period from the time the loan was made immediately due and payable 
until the payment date; 
VII. contractual interest of 7.90% on the outstanding loan amount of 
EUR 5 083.79 for the period from the time the loan was made 
immediately due and payable until the remainder of the loan is fully 
repaid; 
5. The District Court in Kežmarok (‘the district court’) upheld a large part of these 
claims and ordered HD to pay to the bank the amounts set out in points 4(I), (II), 
(III), (III), (IV) and (V). [Or. 3] 
6. However, the district court dismissed the claim in the part indicated in 
points 4(VI) and (VII). 
7. Therefore, the district court did not award to the bank contractual interest of 
7.90% on the outstanding loan amount of EUR 5 083.79 for the period from 
28 December 2017 until the remainder of the loan is fully repaid. The district 
court stated that no such interest was awarded due to the fact that the applicable 
law only grants the creditor the right to default interest as a result of the claim 
becoming immediately due and payable (Paragraph 517(2) of the Civil Code), and 
this view was shared both by the Najvyšší súd Slovenskej republiky (Supreme 
Court of the Slovak Republic) […] [case reference number] and by the Ústavný 
súd Slovenskej republiky (Constitutional Court of the Slovak Republic) […] [case 
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reference number]. In addition, the district court pointed out that in other court 
proceedings, a court had ruled in a final judgment that an identical clause in an 
agreement with the bank concerning the payment of interest over and above 
default interest (‘accumulation of interest’) was found to be an unfair contractual 
term, and as a result the bank had been prohibited from applying this clause in 
future pursuant to Paragraph 53a of the Civil Code. 
8. The Bank appealed against the judgment and requested that the court of appeal 
award it contractual interest for the period after the loan had been made 
immediately due and payable in addition to default interest. The Bank relied, inter 
alia, on the judgment of the Court of Justice of the European Union in Joined 
Cases C-96/16 and C-94/17 in which the Court indicated that the purpose of 
interest is remuneration for the use of a sum of money until it is repaid. 
9. It is precisely the judgment of the Court of Justice delivered in response to the 
Spanish court’s question (C-96/16 and C-94/17) that makes it difficult to clearly 
interpret the law in this case, all the more so because the court of appeal 
distinguishes between, on the one hand, the function of interest payable 
(contractual interest) as the price of the service of credit and, on the other hand, 
the function of statutory default interest as a penalty and partial compensation. 
Compared to the Spanish legal order, the Slovak Republic has a different legal 
framework for punishing debtors for late payment. Slovak law explicitly regulates 
the regime applicable as a result of a claim becoming due and payable, that is to 
say: 1. default interest; 2. damages; 3. other penalties (for instance, contractual 
penalties); 4. the limit for all penalties combined; and 5. the prohibition on 
derogations from standard statutory regulations to the detriment of the consumer. 
II. Slovak law 
10. Pursuant to Paragraph 54(1) of the Civil Code […] [subparagraph number], 
contractual provisions included in a contract concluded with a consumer may 
not derogate from the provisions of that law to the detriment of the 
consumer. In particular, the consumer may not waive in advance his rights 
granted by that law or by separate provisions which confer protection on 
consumers, and may not otherwise worsen his contractual position. 
11. Pursuant to Paragraph 503(1) of the Obchodný zákonník (Commercial Code) […] 
[subparagraph number], interest is payable on the same date on which the 
debtor is obliged to return the funds used. If the date of repayment of the funds 
made available exceeds one year, interest is payable at the end of each calendar 
year. At the time when the remaining part of the funds made available must be 
returned, interest is also payable [Or. 4] in respect of this part. 
12. Pursuant to Paragraph 517(2) of the Civil Code: ‘In the event of a delay in debt 
repayment, the creditor shall have the right to demand from the debtor 
default interest in addition to meeting his obligation where the debtor is not 
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required by this law to pay a default charge; the amount of default interest and of 
the default charge shall be set forth in an implementing provision’.  
13. Pursuant to Paragraph 519 of the Civil Code, the creditor’s right to obtain 
compensation for the damage caused by the debtor’s delay remains 
unaffected; however, in the case of a delay in debt repayment, the creditor 
may claim compensation for damages to the extent that these are not covered 
by default interest or the default charge. 
14. Pursuant to Government Regulation No 87/1995 Zz.: 
§ 3. The amount of default interest shall be the European Central Bank’s 
benchmark interest rate plus five percentage points […] [footnote reference] in 
force on the first day of default in debt repayment. 
§ 3a. 
(1) 
Where the purpose of the contract concluded with the consumer is to make funds 
available to the consumer, penalties for late repayment by the consumer may not 
exceed in total the average annual percentage rate published most recently under 
the specific provision [footnote reference] before the default occurred by more 
than 10 percentage points per annum and, at the same time, may not exceed three 
times the default interest provided for in this Government Regulation; the annual 
percentage rate for a similar type of consumer credit shall be regarded as 
conclusive. 
(2) 
The penalties under subparagraph 1 shall be deemed to include default interest, 
contractual penalties and any other consideration for late repayment of funds by 
the consumer. 
(3) 
If the penalties under subparagraph 1 reach the amount of the funds made 
available, subsequent penalties for late repayment of funds by the consumer shall 
not exceed the default interest provided for in this Government Regulation. 
15. Pursuant to § 53a of the Civil Code […] [subparagraph number], if a court has 
found a term included in a consumer contract of a type which is regularly 
concluded and whose terms are substantially beyond the consumer’s control, or in 
general terms and conditions, to be invalid because of its unfair nature or if a court 
has denied the supplier’s claim because of such a term, the supplier is required to 
cease to apply this term or an analogous term in contracts with all consumers. The 
supplier is also under this obligation if a court has ordered him, in connection with 
such a term, to return the amount of unjust enrichment to the consumer, redress 
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the damage or pay the appropriate compensation. The same obligation also applies 
to the supplier’s [Or. 5] legal successor. 
III. European Union law 
16. Recital 13 of Directive 93/13: 
‘Whereas the statutory or regulatory provisions of the Member States which 
directly or indirectly determine the terms of consumer contracts are presumed not 
to contain unfair terms; whereas, therefore, it does not appear to be necessary to 
subject the terms which reflect mandatory statutory or regulatory provisions and 
the principles or provisions of international conventions to which the Member 
States or the Community are party; whereas in that respect the wording 
‘mandatory statutory or regulatory provisions’ in Article 1 (2) also covers rules 
which, according to the law, shall apply between the contracting parties provided 
that no other arrangements have been established’. 
Article 1 of the directive: 
‘The purpose of this Directive is to approximate the laws, regulations and 
administrative provisions of the Member States relating to unfair terms in 
contracts concluded between a seller or supplier and a consumer. 
The contractual terms which reflect mandatory statutory or regulatory provisions 
and the provisions or principles of international conventions to which the Member 
States or the Community are party, particularly in the transport area, shall not be 
subject to the provisions of this Directive’. 
Article 3(1) and (3) of the directive: 
‘A contractual term which has not been individually negotiated shall be regarded 
as unfair if, contrary to the requirement of good faith, it causes a significant 
imbalance in the parties’ rights and obligations arising under the contract, to the 
detriment of the consumer. 
The Annex shall contain an indicative and non-exhaustive list of the terms which 
may be regarded as unfair’. 
Article 4(1) of the directive: 
‘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’. 
Article 6(1) of the directive: 
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‘Member States shall lay down that unfair terms used in a contract concluded with 
a consumer by a seller or supplier shall, as provided for under their national law, 
not be [Or. 6] binding on the consumer and that the contract shall continue to bind 
the parties upon those terms if it is capable of continuing in existence without the 
unfair terms’. 
Article 7(1) of the directive: 
‘Member States shall ensure that, in the interests of consumers and of competitors, 
adequate and effective means exist to prevent the continued use of unfair terms in 
contracts concluded with consumers by sellers or suppliers’. 
Article 8 of the directive: 
‘Member States may adopt or retain the most stringent provisions compatible with 
the Treaty in the area covered by this Directive, to ensure a maximum degree of 
protection for the consumer’. 
Point 1(e) of the Annex to the directive includes in the list of contractual terms 
referred to in Article 3(3) thereof, those terms which have the object or effect of 
‘requiring any consumer who fails to fulfil his obligation to pay a 
disproportionately high sum in compensation’. 
IV. Questions referred 
First question 
17. Under Slovak legislation, a creditor is entitled to default interest whose amount is 
determined by the government by way of a regulation depending on the state of 
the economy 1/. However, if the creditor has suffered damage in excess of default 
interest, the creditor is also entitled to compensation. If the creditor has suffered 
damage, his right to compensation is not limited by law. The only limit is the 
amount of actual damage. However, the law imposes an obligation to deduct 
default interest from the damage which serves as minimum flat rate 
compensation, but default interest in the form of a flat rate is tolerated because 
default interest serves as a penalty at the same time. 
18. The court points out that the creditor’s rights discussed in the previous point are 
stipulated in statute, and therefore the creditor has these rights even where they 
have not been agreed. The law therefore guarantees that the damage suffered by 
the creditor as a result of the consumer’s delay will be compensated in full, but at 
the same time prohibits in consumer cases contractual terms that worsen the 
consumer’s legal position. 
19. However, going beyond the framework arising from the penalty and compensation 
mechanism limited by statute, the bank relies on the judgment of the Court of 
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Justice in Joined Cases C-96/16 and C-94/17 and applies contractual interest 
together with default interest, arguing [Or. 7] that interest is due until the money 
is repaid. This is supported by the view that the debtor uses the money and should 
therefore pay interest. In this connection, an interpretation problem has arisen 
which has prompted the court to refer questions for a preliminary ruling. 
20. There should be no doubt that if the consumer fails to return the money, he will 
have to bear the costs associated with the delay. As the court has already noted, 
Slovak law grants creditors both the right to full compensation for costs borne as a 
result of non-payment and the right to penalties (default interest). However, 
contractual interest for the use of money is the price of the service, and the 
Slovak legislature has regulated the obligation to pay the price for the product 
even after the agreed period has expired only with respect to one type of contract, 
namely, rent under contracts for the lease of movables in connection with business 
activity 2/. 
21. With respect to loans, the Civil Code does not explicitly provide for the possibility 
of the price of the service being paid even after the agreed period for the use of the 
money has expired. In addition to compensation for damage, the law only lays 
down the obligation to pay default interest, at the same time limiting such default 
interest by way of a government regulation. Contractual interest violates this 
statutory limit. 
22. The court cannot fail to address the effects of the accumulation of contractual 
interest and default interest and whether such cumulation negates the entire 
penalty and compensation mechanism provided for in national law. 
23. The creditor is also able to apply other penalties, such as a contractual penalty, but 
if all the penalties combined reach the principal amount of the claim, the creditor 
is subsequently only entitled to default interest 3/. 
24. Therefore, Slovak law grants the creditor full compensation for the damage he 
has suffered as a result of a breach of contract by a consumer. The law provides 
for the same regime with respect to all pecuniary claims, for example claims 
arising from contracts for a specific work and rental agreements as well as 
consumer credit agreements and other contracts. As regards default interest, the 
Civil Code in no way favours banks and other lenders over other entities to which 
pecuniary claims are owed. 
25. The law prohibits contractual terms that worsen the consumer’s position in 
comparison to that stipulated in the Civil Code (Paragraph 54(1) of the Civil 
Code). 
26. There should be no doubt that in addition to the penalty mechanism provided for 
by statute, which assumes full compensation for the damage suffered by the 
creditor, any additional burden, namely contractual interest (accumulation of 
interest), goes beyond the framework of the law and worsens the consumer’s 
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position compared to that stipulated in applicable laws, which is prohibited under 
Paragraph 54(1) of the Civil Code. 
27. If Slovak law were to be disregarded, taking only the obligation to pay contractual 
interest on top of default interest into account, the consumer’s position in such a 
legal environment would become extremely unfavourable, since after 
unilaterally declaring [Or. 8] the loan immediately due and payable, the 
creditor would not only retain all his rights under the agreement, including 
interest, but could also add default interest and other penalties on top and 
would, moreover, be entitled to compensation for damage. On the other 
hand, the consumer would not retain any contractual advantages. 
28. Therefore, once the loan was declared immediately due and payable, the 
situation would become extremely detrimental to the consumer, while the 
creditor, in addition to all his retained rights, would be able to take 
advantage of the statutory penalty and compensation mechanism. 
29. Under Slovak law, a bank is not obliged to declare a loan immediately due and 
payable. It is the bank’s exclusive prerogative to do so. If the bank does not 
declare the loan immediately due and payable, it is entitled to contractual interest 
until the end of the period stipulated in the agreement. It is, however, almost 
certain that if the bank were to declare a loan immediately due and payable and 
the bank’s position were to be accepted, this would result in a significantly more 
favourable outcome for the bank with regard to the accumulation of contractual 
interest and default interest. The sooner the loan becomes immediately due and 
payable, the sooner the bank will start to benefit from the accumulation of interest. 
However, when combined with the consumer’s unfavourable and weak social 
position, such a mechanism would contribute to the deterioration of the 
consumers’ quality of life. 
30. It cannot be assumed that hundreds of thousands of consumers would 
enthusiastically breach their obligations to repay consumer loans if such delays 
lead to court and enforcement proceedings, which often result in consumers’ 
assets being attached during enforcement. 
31. Rather, the problem appears to lie, on the one hand, in the unfavourable financial 
situation of consumers, as in HD’s case, and, on the other hand, in the lender’s 
failure to observe his obligation to analyse the consumer’s creditworthiness and to 
make a loan decision with professional diligence depending on the consumer’s 
financial situation. In this respect, the barest modicum of prudence would have 
been sufficient for the bank to recognise that HD was not creditworthy; instead, 
the bank granted the loan and immediately demanded protection. The Consumer 
Credit Directive aims to ensure that the consumer’s creditworthiness is taken into 
account 4/. 
32. The court notes that in the light of the case-law, the bank’s claim also constitutes 
property, and the law secures such property with default interest, the right to 
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compensation and the right to other penalties. The concepts of default in payment 
and default interest are usually linked to the rights arising from an infringement of 
the law, while interest as the price of money is linked to the period of permitted 
use of money, which logically is the period agreed in the contract until the loan 
becomes due and payable. 
33. Under Slovak law as well, default interest constitutes a penalty while contractual 
interest is the price at which funds are made available. The difference, however, is 
that Slovak law (the Civil Code) does not lay down an obligation for consumers or 
other debtors to pay contractual interest in addition to default interest after a 
default in payment of the loan. Any creditor whose claim is of a financial nature 
has the right to default interest, which is limited by law, against the consumer after 
a default in payment of the loan. Therefore, the issue is not the right to interest, 
[Or. 9] which is the price for making the money available and for the use of the 
money during the period agreed in the contract, that is, until the loan is declared 
due and payable. Until the loan is declared due and payable, the contract is 
properly performed and contractual interest applies, but after it has been declared 
due and payable, an infringement occurs along with the resulting claims, including 
in particular penalties and compensation for damage. 
34. As the court has already noted, the only type of contract provided for in the Civil 
Code which assumes payment of the price even after the agreed period has 
expired is the lease of movables in connection with business activity under 
Paragraph 723(1) of the Civil Code, according to which the price (rent) is still 
payable even after the agreed period has expired /2. 
35. Therefore, Slovak law: 1) does not provide for interest for the use of funds made 
available to the consumer after they have been declared due and payable, but only 
for default interest together with other penalties and compensation; and 2) does 
not allow the consumer’s position to be worsened by contractual terms compared 
that stipulated in applicable laws (Paragraph 54(1) of the Civil Code). 
36. The payment of contractual interest even after the date of the loan becoming due 
and payable raises doubts and therefore the court has decided to refer the 
following question for a preliminary ruling […]. 
[…] [repetition of the first question] 
Second question 
37. The court asks the second question in the event that the answer to the first 
question is in the affirmative, that is, if European Union law precludes the Slovak 
provision on default in connection with the prohibition on the consumer’s position 
being worsened by contractual terms. 
38. There should be no doubt that if the consumer returns the money to the bank on 
time (before the loan becomes due and payable), then the bank naturally seeks a 
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new investment. However, there should also be no doubt that a new investment 
with a new consumer will not necessarily guarantee the same return as the one 
with the previous consumer. [Or. 10] 
39. As a result, if contractual interest were to be paid in combination with penalties 
and compensation, this would essentially correspond to flat rate compensation. 
However, assuming that the actual damage is lower, the payment of flat rate costs 
raises fundamental questions and doubts and undermines the concept of improving 
the quality of life of consumers. Therefore, the court refers the second question for 
a preliminary ruling. 
[…] [repetition of the second question] 
[…] [information on the possibility of appeal] 
[…] [place, date] 
[…] Michal Boroň 
Presiding Judge, Judge-Rapporteur 
[…] 
Explanatory notes and references: 
1. In the past, the government of the Slovak Republic set the interest rate 
limit for the period from 20 December 1993 until 16 March 1995 at 
24% (https://www.najpravo.sk/clanky/vyvoj-sadzieb-urokov-z–
omeskania.html?print=l).  
2. Pursuant to Paragraph 723(1) of the Civil Code, if the lessee returns 
the asset after the date agreed in the contract, he is obliged to pay rent 
until the return of the asset. If the lessee is in default with the return of 
the asset, he is also obliged to pay a default charge. 
Government Regulation No 87/1995 Zz., Paragraph 3a(3); see also 
Paragraph 13. 
3. There are approximately 3 500 000 enforcement actions pending in 
Slovakia; see also the judgment of the Court of Justice in C-76/10. 
[Or. 11] 
4. Recital 28 of Directive 2008/48/EC of the European Parliament and of 
the Council of 23 April 2008 on credit agreements for consumers and 
repealing Council Directive 87/102/EEC. 
5. For instance, Joined Cases C-240/98 to C-244/98: ‘the system of 
protection introduced by the Directive is based on the idea that the 
consumer is in a weak position vis-à-vis the seller or supplier, as 
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regards both his bargaining power and his level of knowledge. This 
leads to the consumer agreeing to terms drawn up in advance by the 
seller or supplier without being able to influence the content of the 
terms. The aim of Article 6 of the Directive, which requires Member 
States to lay down that unfair terms are not binding on the consumer, 
would not be achieved if the consumer were himself obliged to raise 
the unfair nature of such terms. In disputes where the amounts 
involved are often limited, the lawyers’ fees may be higher than the 
amount at stake, which may deter the consumer from contesting the 
application of an unfair term. While it is true that in many Member 
States procedural rules allow individuals to appear in such disputes in 
person, there is a real danger that, in particular because of ignorance, 
consumers will not invoke the unfair nature of the conditions imposed 
on them’.