The European Court of Justice has recently given a judgement that dealt with unfair commercial practices of a debt collection agency. This judgement is special as, contrary to many other judgements of the Court on the Unfair Commercial Practices Directive, it did not relate to the behaviour prior to entering into the agreement with a consumer, but to the behaviour in the performance of such agreement.
This judgement may lead to consumer authorities looking more critically at all that may occur after an agreement has been entered into, a settlement agreement for example. If a consumer is (seriously) disadvantaged in such an agreement, this could be qualified as an aggressive commercial practice. This observation subsequently means that the consumer is not only eligible for compensation for the loss suffered, but also that the whole settlement agreement must be nullified.
This case concerned a Lithuanian debt collection agency, Gelvora, that had entered into agreements with various banks for the sale (and transfer) of debts. After the debt was sold to Gelvora, it immediately proceeded to collect all claims from the debtors. Sometimes this took place in parallel with procedures of forced collection carried out by bailiffs on the basis of definitive judicial rulings (execution process). This practice was regarded as aggressive by several debtors. This dispute eventually led to the national court submitting the question to the European Court whether these kind of actions also fell under the Unfair Commercial Practices Directive.
On 20 July 2017, the Court answered the submitted question in the affirmative whereby it considered that the words ‘directly relating to […] the sale of a product’ not only includes all measures that are taken in connection with the entering into a contract but also those that are taken in connection with the performance of such.
In the current case it appeared that the debts sold to Gelvora found their origin in the rendering of a service, namely the granting of credit, where the consideration consisted of the repayment of the credit in instalments plus interest at a prior determined interest rate. The collection measures are therefore directly related to a ‘product’ in the meaning of the unfair commercial practices directive. With this judgement, the Court confirmed the view of the Commission for the first time by stating that debt collection actions must be viewed as commercial practices after the sale.
At the same time, the Court noted that these activities of Gelvora must possibly in themselves be viewed as a ‘commercial practice’, as these activities could influence the decision-making process of a consumer on the payment for a product.
The Court also emphasised the undesirability of excluding the applicability of the unfair commercial practices directive in regard to the behaviour of the trader after the agreement has been entered into.
What does this judgement mean for you? This judgement is in any event important for debt collection agencies and bailiffs. It confirms that these service providers fall within the reach of the unfair commercial practices directive.
This judgement is special as it is the first time that the Court confirmed the view of various national consumer authorities. The Court emphasised in this judgement that after the agreement has been entered into, the trader must also comply with the same standards that applied before the agreement was entered into. Although the unfair commercial practices directive already indicates that this also applies to the behaviour after the consumer agreement has been entered into, it is nevertheless exceptional that the Court now expressed itself in relation to facts after the agreement has been entered into. Normally speaking, when determining whether or not there is an unfair commercial practice, only the question whether an act forms part of a commercial strategy of an entrepreneur and whether this relates directly to the sales promotion and the turnover of products plays a role.
In conclusion, this judgement emphasised that during the whole legal relationship with a consumer, an entrepreneur must comply with the unfair commercial practices provisions. If he fails to do so, this may lead to the consumer not only being eligible for compensation for the loss suffered, but also that the whole agreement must be nullified.
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