JUDGMENT OF THE COURT of 23 May 2024 in Joined Cases E-13/22 and E-1/23 – Birgir Þór Gylfason and Jórunn S. Gröndal v Landsbankinn hf. and Elva Dögg Sverrisdóttir and Ólafur Viggó Sigurðsson v Íslandsbanki hf. (Consumer protection – Directive 2014/17/EU – Variable interest rates – Mortgage loans – Transparency requirements – Directive 93/13/EEC – Directive 2008/48/EC – Unfair contract terms)
Date: 2024-05-23
Institutions: EFTA Court
Subjects: European Economic Area, Iceland, consumer protection, contract terms, interest, mortgage, real estate credit, real property, redemption








C_202405988EN.000101.fmx.xml












Official Journal of the European Union


EN
C series













C/2024/5988


3.10.2024






JUDGMENT OF THE COURT
of 23 May 2024
         
in Joined Cases E-13/22 and E-1/23
Birgir Þór Gylfason and Jórunn S. Gröndal v Landsbankinn hf. and Elva Dögg Sverrisdóttir and Ólafur Viggó Sigurðsson v Íslandsbanki hf.


(Consumer protection – Directive 2014/17/EU – Variable interest rates – Mortgage loans – Transparency requirements – Directive 93/13/EEC – Directive 2008/48/EC – Unfair contract terms)


(C/2024/5988)

In Joined Cases E-13/22 and E-1/23, Birgir Þór Gylfason and Jórunn S. Gröndal v Landsbankinn hf. and Elva Dögg Sverrisdóttir and Ólafur Viggó Sigurðsson v Íslandsbanki hf. – REQUESTS to the Court under Article 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice by Reykjavík District Court (Héraðsdómur Reykjavíkur) and Reykjanes District Court (Héraðsdómur Reykjaness), concerning, inter alia, the interpretation and application of Article 24 of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and of Article 10(2)(f) of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers, the Court, composed of Páll Hreinsson, President, Bernd Hammermann and Ola Mestad (ad hoc) (Judge-Rapporteur), Judges, gave judgment on 23 May 2024, the operative part of which is as follows:






1.


Article 24(a) of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property would be deprived of its effectiveness if other elements used in addition to indexes or reference rates to calculate the borrowing rate are excluded from the outset from an assessment of transparency. Therefore, the requirements of Article 24 as to clarity, accessibility, objectivity and verifiability apply whenever an index or a reference rate is used to calculate the borrowing rate.










2.


It is incompatible with Article 24 of Directive 2014/17 if contract terms and the information provided to a consumer under a mortgage credit agreement are not formally and grammatically intelligible, or do not enable an average consumer, who is reasonably well-informed and reasonably observant and circumspect, to understand the specific functioning of the method used for calculating the borrowing rate, and, where appropriate the relationship between that mechanism and that provided for by other contractual terms so that the consumer is in a position to evaluate the economic consequences for him or her which derive from the contract.










3.


Article 5 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as meaning that, with a view to complying with the transparency requirement for a contractual term setting a variable interest rate under a mortgage loan agreement, that term must not only be formally and grammatically intelligible but also enable an average consumer, who is reasonably well-informed and reasonably observant and circumspect, to be in a position to understand the specific functioning of the method used for calculating that rate and thus to evaluate, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term on his or her financial obligations. It is for the national court to determine whether the financial institution has provided the consumer with sufficient information to enable him or her to apprise himself or herself of the specific functioning of the method used for calculating the rate, and, where appropriate, the relationship between that mechanism and that provided for by other contractual terms.










4.


It is for the national court to determine, taking account of the criteria laid down in Article 3(1) and Article 5 of Directive 93/13, whether, having regard to the particular circumstances of the case, a term in a variable-rate mortgage loan agreement meets the requirements of good faith, balance and transparency laid down by that directive. The assessment of unfairness must be made taking into account the nature of the goods or services for which the contract was concluded, which includes the high level of consumer protection warranted in the area of consumer credit specific to mortgage agreements, as expressed both in the case law under Directive 93/13 and through the requirements of transparency under Directive 2014/17.










5.


Terms such as those disputed in the main proceedings must be declared unfair in accordance with Article 3(1) of Directive 93/13 where such terms cause a significant imbalance in the parties’ rights and obligations under a contract to the detriment of the consumer, which is for the referring courts to ascertain.










6.


It is for the referring courts to determine whether, in the cases in the main proceedings, the invalidity of any terms held to be unfair in the mortgage agreements in question would be likely to prevent the contracts from continuing in existence. Should the annulment of such terms prevent the contracts from continuing in existence, it will be for the referring courts, who are not precluded by Article 7(1) of Directive 93/13 from doing so, to replace the unfair terms with provisions of national law of a supplementary nature. However, if the contracts in question can continue to exist without the terms in question, Article 6(1) of the directive does not permit the referring courts to substitute an unfair term in a loan agreement with a supplementary provision of national law.






ELI: http://data.europa.eu/eli/C/2024/5988/oj
ISSN 1977-091X (electronic edition)