Andrea Fejős EUROPEA , HU GARIA AD SERBIA MODELS OF FAIR ESS I CO SUMER CO ...

315 Pages·2013·2.26 MB·English

University of Szeged
Faculty of Law and Political Sciences
Graduate School

Andrea Fejős

EUROPEA!, HU!GARIA! A!D SERBIA! MODELS OF
FAIR!ESS I! CO!SUMER CO!TRACTS A!D THEIR
APPLICATIO! TO CO!SUMER CREDIT

PhD Thesis

Supervisor:
Klára Dr. Blazovichné Dr. Gellén PhD
Associate Professor

Szeged, 2013
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TABLE OF CO!TE!TS

TABLE OF CONTENTS...................................................................................................2
ABBREVIATIONS INDEX..............................................................................................6
CHAPTER I.......................................................................................................................8
INTRODUCTION .............................................................................................................8
CHAPTER II....................................................................................................................21
THE REGIME OF UNFAIR CONTRACT TERMS IN THE EUROPEAN UNION ....21
II.1. Regulation of unfair contract terms in Europe: a brief overview.........................21
II.2. The basic concept of unfairness in the UCTD......................................................23
II.2.1. The concept of good faith..............................................................................24
II.2.2. Significant imbalance in the parties’ rights and obligations........................25
II.2.3. The relation between “good faith” and “significant imbalance”................27
II.2.4. The role of the CJEU in interpreting the test of fairness..............................29
II.2.5. Circumstances to be taken into account in determining fairness..................32
II.2.6. Terms on the indicative list...........................................................................33
II.2.7. Intermediary conclusions..............................................................................34
II.3. The role of transparency in the UCTD.................................................................35
II.3.1. The meaning of transparency........................................................................35
II.3.1.1. The benchmark consumer.......................................................................38
II.3.1.2. The wider meaning of transparency.......................................................40
II.3.2. Transparency and substantive (un)fairness ..................................................40
II.3.3. Transparency as independent basis of unfairness.........................................42
II.3.4. Intermediary conclusions..............................................................................43
II.4. Limits of the test of a fairness..............................................................................44
II.4.1. The “mandatory rules” exemption................................................................44
II.4.2. The “core terms” exemption.........................................................................45
II.4.3. The “individually negotiated terms” exemption...........................................48
II.4.4. Time of assessing fairness.............................................................................50
II.4.5. Intermediary conclusions..............................................................................51
II.5. The consequence of unfair terms: remedial control.............................................52
II.6. Freedom of contract and the regulation of standard terms...................................53
II.7. Instead of conclusion: the overall regulatory objective of the UCTD - freedom or
fairness?........................................................................................................................58
CHAPTER III..................................................................................................................61
THE REGIME OF UNFAIR CONTRACT TERMS IN HUNGARY ............................61
III. 1. Development of consumer protection law and policy: a brief overview...........61
III.1.1.The control of unfair terms before implementation of consumer acquis......63
III.2. The implementation of the UCTD......................................................................64
III. 3. The basic concept of unfairness in Hungary......................................................66
III.3.1. The principle of good faith...........................................................................67
III.3.2. Significant imbalance in the parties’ rights and obligations.......................69
III.3.3.The relation between good faith and significant imbalance.........................75
III.3.4. Circumstances to be taken into account in determining fairness................77
III.3.5. The “black” and “grey” list of unfair contract terms.................................77
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III.3.6. Intermediary conclusions.............................................................................78
III.4. The role of transparency in Hungary..................................................................78
III.4.1. The benchmark consumer............................................................................79
III.4.2. Intermediary conclusions.............................................................................80
III.5. Limits of the test of fairness in Hungary.............................................................80
III.5.1. The “mandatory rules” exemption..............................................................81
III.5.2. The “core terms” exemption........................................................................81
III.5.3. The “individually negotiated terms” exemption..........................................82
III.5.4. Time of assessing fairness............................................................................84
III.5.5. Intermediary conclusions.............................................................................87
III.6. The consequence of unfair terms: remedial control............................................87
III.7. Conclusion ..........................................................................................................88
THE REGIME OF UNFAIR CONTRACT TERMS IN SERBIA..................................90
IV.1. Development of consumer protection law and policy: a brief overview............90
IV. 2. Control of unfair terms before the implementation of the UCTD and the
implementation of the UCTD.......................................................................................92
IV.3. The basic concept of unfairness in Serbia...........................................................94
IV.3.1. The principle of good faith...........................................................................95
IV.3.2. Significant imbalance in the parties’ rights and obligations.......................96
IV.3.3. Performance substantially different from legitimately expected................100
IV.3.4. Circumstances to be taken into account in determining fairness...............101
IV.3.5. The “black” and “ grey” list of unfair contract terms..............................102
IV.3.6. Intermediary conclusions...........................................................................102
IV.4. The role of transparency in Serbia....................................................................103
IV.4.1. The benchmark consumer...........................................................................104
III.4.2. Intermediary conclusions...........................................................................105
IV.5. Limits of the test of fairness in Serbia..............................................................105
IV.5.1. Consumer protection law versus general contract law..............................107
IV.5.2. Time of assessing unfairness......................................................................108
IV.5.3. Intermediary conclusions...........................................................................111
IV.6. The consequence of unfair terms – remedial control........................................112
IV.7. Conclusion........................................................................................................112
CHAPTER V..................................................................................................................115
THE REGIME OF UNFAIR TERMS IN CONSUMER CREDIT CONTRACTS.......115
V. 1. Characteristics of consumer credit: a general overview....................................115
V.2. Regulation of consumer credit in the European Union: a brief overview..........120
V.3. The two systems of consumer credit..................................................................122
V.4. Consumer credit contracts defined.....................................................................125
V. 5. Special features of consumer credit contracts...................................................128
V.5.1. The importance and complexity of contracts...............................................128
V.5.2. Credit in relation to risk and time...............................................................130
V.5.3. The banker-customer relationship...............................................................131
V.5.4. The role of self-regulatory codes.................................................................133
V.5.5. Increased regulation....................................................................................134
V. 6. Unfair terms in consumer credit contracts........................................................135
V.6.1. Fairness regimes of core terms in consumer credit contracts.....................135
V.6.1.1. Fairness of core terms in Hungary...........................................................136
V.6.1.1.1. Fairness of the main subject matter......................................................140
V.6.1.1.2. Fairness of the price..............................................................................141
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V.6.1.1.2.1. Controversial comparative interpretations of the exemption.........141
V.6.1.1.2.2. Is APR the price?............................................................................144
V.6.1.1.2.3. Is interest the price?.......................................................................148
V.6.1.1.2.4. Transparent core terms: the example of interest............................149
V.6.1.2. Fairness of core terms in Serbia...............................................................152
V.6.1.3. Alternative control mechanisms to the price............................................154
V.6.1.3.1. The role of traditional safeguards of contractual balance................156
V.6.1.3.2. Price restrictions...............................................................................163
V.6.1.4. Core terms and other exemptions.............................................................165
V.6.1.5. Intermediary conclusions.........................................................................167
V.6.2. Fairness regimes of ancillary terms in consumer credit contracts.............169
V.6.2.1. Fairness of variation clauses....................................................................172
V.6.2.1.1. Fairness of variation clauses in Hungary.........................................175
V.6.2.1.2. Fairness of variation clauses in Serbia.............................................184
V.6.2.1.3. Instead of conclusion: the broader question of fairness of variation
clauses................................................................................................................186
V.6.2.1.4. Variation clauses and traditional contract law institutions..............190
V.6.2.2. Fairness of default interest terms.............................................................192
V.6.2.3. Social force majeure and ancillary contract terms..................................196
V.6.2.4. Fairness of other ancillary contract terms in credit contract..................201
V.6.2.5. Ancillary terms and balancing terms........................................................202
V.6.2.6. Ancillary terms and exemptions from the test of fairness.........................203
V.6.2.7. Intermediary conclusions.........................................................................204
V.6.3. The role of transparency in credit contracts................................................206
V.6.3.1. The meaning of transparency in consumer credit....................................207
V.6.3.1.1. The benchmark consumer......................................................................211
V.6.3.2. Transparency as independent basis of unfairness....................................213
V.6.3.3. Instead of conclusion: transparency in a wider picture...........................214
V.7. Freedom of contract and the regulation of consumer credit...............................216
V.8. Conclusion..........................................................................................................222
ENFORCEMENT REGIMES OF UNFAIR TERMS IN CREDIT CONTRACTS......226
VI.1. Enforcement of unfair terms: setting the problem............................................226
VI.2. Preventive control of unfair terms....................................................................229
VI.2.1. Ultra-preventive enforcement models and methods...................................231
VI.2.2. Intermediary conclusions...........................................................................237
VI.3. Enforcement of unfair terms in consumer credit contracts in Hungary............238
VI.3.1. Intermediary conclusions...........................................................................244
VI.4. Enforcement of unfair terms in consumer credit contracts in Serbia................246
VI.4.1. Intermediary conclusions...........................................................................250
VI.5. Conclusion........................................................................................................251
CHAPTER VII...............................................................................................................253
THE FUTURE OF UNFAIR CONTRACT TERMS REGIMES..................................253
VII.1. Review of consumer acquis and unification of EU contract law....................253
VII.1.1. Autonomous initiative for (unifying) standard contract terms.................256
VII.2. European alternatives to the fairness regime of the UCTD.............................257
VII.2.1. The regime of unfair terms in the DCFR..................................................257
VII.2.2. The regime of unfair terms in the pCESL.................................................260
VII.3. The future of unfair contract terms regulation in Hungary.............................262
VII. 4. The future of unfair contract terms regulation in Serbia................................265
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VII.5. Conclusion.......................................................................................................266
CHAPTER VIII..............................................................................................................267
CONCLUSION..............................................................................................................267
VIII.1. The European fairness model.........................................................................268
VIII.2. The Hungarian fairness model.......................................................................270
VIII.3. The Serbian fairness model............................................................................273
VIII.4. Recommendations for a higher level of protection........................................275
BIBLIOGRAPHY..........................................................................................................278
ANNEX..........................................................................................................................314

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ABBREVIATIO!S I!DEX

APR: annual percentage rate of charge
APR HuDecree: (Hungarian) Government Decree 83/2010 on Calculation of the APR
CCD: (EU) Directive 2008/48/EC on Credit Agreements to for Consumers
CJEU: (EU) Court of Justice of the European Union
DCFR: (EU) Draft Common Frame of Reference
FCA: (UK) Financial Conduct Authority
FSA: (UK) Financial Services Authority
HuCC: (Hungarian) Act IV of 1959 on the Civil Code
HuCCA: (Hungarian) Act CLXII of 2009 on Credit Agreements for Consumers
HuCFR: (Hungarian) Commissioner for Fundamental Rights
HuCFRA: (Hungarian) Act CXI of 2011 on the Commissioner for Fundamental Rights
HuCIFEA: (Hungarian) Act CXII of 1996 on Credit Institutions and Financial Enterprises
HuCode: (Hungarian) Code of Conduct on Principles of Fair Conduct of Financial Institutions
Engaged in Retail Lending of 2010
HuCPA: Act CLV of 1997 on Consumer Protection
HuFAB: (Hungarian) Financial Arbitration Boards
HuFSA: (Hungarian) Financial Supervisory Authority
HuNB: (Hungarian) Central Bank
HuNBA: (Hungarian) Act CXXXIX of 2013 on the Hungarian National Bank
HuSC: (Hungarian) Supreme Court
HuUCT Decree: (Hungarian) Government Decree 18/1999 on Unfair Contract Terms
ID: (EU) Directive 98/27/EC on Injunctions
nHuCC: (Hungarian) Act V of 2013 on the Civil Code (new Civil Code)
OFT: (UK) Office of Fair Trading
pCESL: (EU) Proposal for a Regulation on a Common European Sales Law
SECCI: Standard European Consumer Credit Information
SrbADR Decision: (Serbian) Decision on Complaint Handling by Banks and Financial Leasing
Providers and the Activities of SrbNB upon Notification of User Complaints of 2011
SrbCode: (Serbian) Code of Banking Practice of 2007
SrbCPA: (Serbian) Consumer Protection Act of 2010
SrbCPEFSU: (Serbian) Centre for Protection and Education of Financial Services Users
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SrbDIA: (Serbian) Act on Default Interest of 2012
SrbFSUPA: (Serbian) Financial Services Users Protection Act of 2011
SrbLOA: (Serbian) Law of Obligations Act of 1978
SrbNB: (Serbian) National Bank
SrbSC: (Serbian) Supreme Court
TFEU: (EU) Treaty on the Functioning of the European Union
UCPD: (EU) Directive 2005/29/EC on Unfair Commercial Practices
UCTD: (EU) Directive 1993/13/EC on Unfair Contract Terms
UK Law Commission: (UK) Law Commission for England and Wales and the Scottish Law
Commission
UM HuDecree: (Hungarian) Decree 275/2010 on Conditions of Unilateral Modification of
Contractual Interest

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CHAPTER I
I!TRODUCTIO!

Gábor and Tünde just got married. They decided to immediately buy their own
home. However, as most young couples, in the lack of sufficient capital, they had to take
a loan. The house needed to be furnished and required small renovations for which the
couple took further loans. Not far away, in another country, Zoran and Jelena got
married, and having had similar circumstances, also took a number of loans to start their
life together. After a while, Gábor noticed instalments are considerably higher than they
initially anticipated. Thus Gábor and Tünde realized they did not understand how the
price of the loan will be calculated. At the same time Zoran and Jelena received a letter
from their bank in which they were being notified on the increase of their interest rate
this being allowed for by the standard terms of the contract. In the meantime, Tünde lost
her job that significantly decreased the income of their household. Jelena got ill and
treatments triggered significant expenses. Gábor and Tünde still struggle with payments,
but Tibor and Jelena already defaulted. The default greatly increased their monthly
payments. Being in trouble, the couples start reading their contracts. After consulting
with lawyer friends they discovered that some terms in their contracts are probably
unfair. However, the reality is that it is far from simple to decide what rules apply to the
above situations and how they might be applied. The law is contained in a complex mix
of European Union (hereinafter: EU) and national rules, both of which contain quite
specific and more general principles, and both of which have things to say about the
fairness of the content of terms and about the way they are presented to consumers. It is
often not clear how these rules should apply to particular kinds of terms, and what
influence real life problems and changed circumstances can have. To complicate matters
further, the regimes expect a certain degree of enforcement of the rules to take place, yet
this is often a matter that depends on available resources, political will and national
traditions. The thesis tries to unfold this complex map of rules, reveal the state of
consumer protection against unfair terms in consumer credit contracts and suggest
improvements for the future.
The objective of the thesis is to analyze the issue of unfair terms in consumer
credit contracts in EU in general, and in the two selected jurisdictions, in Hungary and in
Serbia in particular. Although consumer credits are nominated contracts and there is an
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increasing body of consumer credit specific regulation, the question of unfair terms
remained under the general regime of the unfair contract terms regulation. Therefore, the
foundation of the thesis is the Directive 1993/13/EC on Unfair Terms in Consumer
Contracts (hereinafter: UCTD)1 and its implementing acts, Act IV of 1959 on the Civil
Code of the Republic of Hungary (hereinafter: HuCC) in Hungary, and the Consumer
Protection Act of 2010 (hereinafter: SrbCPA)2 in Serbia. However, as the unfair contract
terms regulation cannot be analyzed in a “vacuum”, the thesis explores the relation
between these “new” consumer protection rules and the “old” or “traditional” contract
law institutions; and the relation between the general regime of unfair contract terms and
the specific regime of consumer credit. Regarding the “new/old” issue, the thesis
especially analyzes the principle of good faith, and the traditional contract law
institutions of laesio enormis, usury, clausula rebus sic stantibus and force majeure, and
the “traditional” regulation of standard terms; and the limits of these tools, i.e. the need
for the new rules. Regarding the “general/specific” issue, the thesis primarily relies on
the Directive 2008/48/EC on Consumer Credit (hereinafter: CCD)3 in EU, on Act CLXII
of 2009 on Credit Agreements for Consumers (hereinafter: HuCCA) and the Act CXII of
1996 on Credit Institutions and Financial Enterprises (hereinafter: HuCIFEA) in
Hungary, and the Financial Services Users Protection Act of 2011 (hereinafter:
SrbFSUPA)4 in Serbia. The key is to understand how these specific rules operate
together with the general unfair terms rules to provide protection.
As the UCTD contains a combination of rules that set standards of fairness and
rules on enforcement of these standards5 the European, Hungarian and Serbian “models
of fairness” referred to in the thesis reflect these two components. Therefore, on the one
hand, the thesis tackles the question of when contract terms are (un)fair. This analysis
evolves around the notions of substantive and procedural fairness. “Substantive
fairness” relates to fairness of the substance of the terms, fairness in the distribution of
contractual rights and obligations between the parties. “Procedural fairness” means
fairness in the process leading up to contract conclusion, primarily the consumers’ real

1 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ L 95, 21.4.1993.
2 Official Gazette of the Republic of Serbia No. 73/2010.
3 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, OJ L 133, 22.5.2008.
4 Official Gazette of the Republic of Serbia No. 36/2011.
5 Hans-Wolfgang Micklitz, Reforming European Unfair Terms Legislation in Consumer Contracts, 6(4)
European Review of Contract Law 347-383, 2010, 347-383, p. 348.
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opportunity to understand the terms of the contract.6 On the other hand, the thesis tackles
the available enforcement mechanisms searching for those that provide for genuinely
effective preventive enforcement.
Although the UCTD was subject to considerable academic attention in the
international arena, in Hungary and in Serbia the regulation of unfair contract terms and
the implementation of the UCTD was not studied in great detail or in a comprehensive
and critical way. Therefore, remedying this gap, the thesis provides a comprehensive
analysis of this issue, and thereby contributes to legal science in Hungary and in Serbia.
Given the fact that the thesis is written in the English language, it potentially has a wider
impact on EU legal science in general as the research principally relies on materials
written in Hungarian and Serbian languages thereby making their achievements
available in English. Moreover, even though the UCTD represents one of the first steps
in the creation of consumer acquis, and therefore was explored by leading academics
from different angles and taking into account different aspects, the issue of unfair
contract terms in relation to contracts of consumer credit has so far not been subject to
any comprehensive and publicly available research. This is the main contribution of the
present research to the legal science in EU in general and in Hungary and Serbia in
particular.
Hungary and Serbia have been chosen as specific jurisdictions for a number of
reasons. First, the issue of unfair contract terms in consumer credit contracts was not
subject to comprehensive academic analysis. This is especially true for Serbia, where the
concept of fairness was just recently introduced by the SrbCPA. Second, the comparison
is unique, and it has not been done before. Third, a comparative analysis is possible,
because the two legal systems show plenty of similarities and a sufficient degree of
differences. Both Hungary and Serbia belongs to civil law families; their contract laws
show similar influences.7 Both countries were socialist states that underwent significant
changes after the change of regime, the most important being the influence of EU law
and policy. Fourth, the selected jurisdictions can learn from each other. Hungary can
learn from Serbia, Serbia has a very modern approach to the regulation of unfair terms,
while Hungary opted for adopting the test in the UCTD that was created in different
times. Due to its slower social and economic development, Serbia can learn from

6 Chris Willett, Fairness in Consumer Contracts: The Case of Unfair Terms, Ashgate, Aldershot, 2007, p.
2.
7 Earlier Roman law and later the great early European codifications, the French Civil Code of 1804, the
Austrian Civil Code of 1811, and the German Civil Code of 1900.
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