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Case Details

Case Details
National ID гр. д. № 4452/2014 г., III г. о., ГК
Member State Bulgaria
Common Name link
Decision type Supreme court decision
Decision date 22/04/2015
Court Supreme Court of Cassations
Subject
Plaintiff C.D.S. (natural person, personal data deleted due to privacy protection rules)
Defendant United Bulgarian Bank AD
Keywords financial services, nullity, unfair terms

Unfair Contract Terms Directive, Article 3, 1. Unfair Contract Terms Directive, Article 5 Unfair Contract Terms Directive, ANNEX I, 2., (b) Unfair Contract Terms Directive, ANNEX I, 2., (c)

1. Clauses in a loan contract which allow the bank to unilaterally increase the interest rate if the final estimated price is significantly increased compared to the price agreed upon conclusion of the contract, without the consumer in such cases having the right to rescind the contract, are generally unfair clauses pursuant to ANNEX I, paragraph 1, subparagraph (l) of Directive 93/13/EEC (implemented into Bulgarian law by Article 143, point 12 of the Consumers Protection Act).
2. The exception provided by ANNEX I, paragraph 2, subparagraph (c), first indent of Directive 93/13/EEC (implemented into Bulgarian law by Article 144, Alinea 3 point 1 of the Consumers Protection Act) is applicable if the increase of the interest rate is due to external reasons that do not depend on the bank, and are caused by the impact of the free market and / or a state regulator.
The plaintiff submitted a statement of claim to the Rouse Regional Court for the proclamation null and void of articles 5.3 and 7.3 of the loan agreement dated 6 June 2007 entered with the defendant. The plaintiff asserts that said clauses are unfair and therefore null and void. The plaintiff claims refund of the interest paid in excess of the initially negotiated interest rate for the period 25 July 2007 г. to 25 November 2012 in the amount of BGN 6,058.14. According to Article 7.3 of the loan contract between the parties the defendant has the right unilaterally to change the amount of the annual fee to manage and service the loan. Said clause does not specify any external reasons beyond the defendant that could lead to a change of the fee. Article 5.3. of the loan contract provides that the defendant has the right unilaterally to change the interest rate depending on the rate of inflation, interest rates of the Bulgarian National Bank and market conditions, notifying the plaintiff within a week or disclosing information on that at the defendant’s offices. The concept of market conditions is not defined in the loan contract.
Rouse Regional Court awarded the claims and sentenced the defendant to the refund the plaintiff the claimed excess of the undue paid interest.
The defendant appealed the first instance decision and the Rouse District Court repealed the first instance decision and rejected the claims of the plaintiff.
Therefore, the plaintiff appealed the second instance court decision to the Supreme Court of Cassations.
The main criterion for the applicability of the exception provided by ANNEX I, paragraph 2, subparagraph (c), first ident of Directive 93/13/EEC (implemented into Bulgarian law by Article 144, Alinea 3 point 1 of the Consumers Protection Act) is changing the price due to external reasons that do not depend on the defendant, and are caused by the impact of the free market and / or state regulator. Then the defendant cannot be considered acting in bad faith under the general definition of unfair terms contained in Art. 3, paragraph 1 of Directive 93/13/EEC (implemented into Bulgarian law by Article 143 of the Consumers Protection Act) since the increase of the loan interest does not depend on its will. In order to assess whether the provisions meet this criterion exception to the general principle, they must be formulated in a clear and unequivocal manner (Article 5 of Directive 93/13/EEC implemented into Bulgarian law by Article 147 of the Consumers Protection Act). The plaintiff must first obtain sufficiently precise information on how the defendant can unilaterally change the loan interest and to be able to respond in the most appropriate way.
Article 7.3 of the loan contract does not specify any external reasons beyond the defendant that could lead to a change of the fee. Therefore, the exceptions under ANNEX I, paragraph 2, subparagraph (c), first indent of Directive 93/13/EEC (implemented into Bulgarian law by Article 144, Alinea 3 point 1 of the Consumers Protection Act) are not applicable to said clause.
The clause of Article 5.3 of the loan contract contains information about the terms and conditions of change in the interest rate under the loan contract which is clear and understandable enough. Said clause refers to the changes in the inflation rate, interest rates of the Bulgarian National Bank and market conditions. Market conditions for the credit activity of commercial banks are regulated by the Bulgarian National Bank. The regulation is done by ordinance, which sets mandatory minimum reserves that banks are required to maintain the methods of their calculation and terms of payment of interest on them, as well as penalties. According to the law the Bulgarian National Bank announces interest rates and is published in the "Official Gazette". This rate reflects the rate of inflation, too. Based on public data for changes in the basic interest rate in the country and conditions of bank regulation on commercial banks the plaintiff is able establish whether there are grounds for amendment of the interest rate under the loan contract.
1. Are the clauses in bank loan contracts pursuant to which the bank is allowed unilaterally to determine the interest rate and management fee unfair?
2. Are the exceptions provided by ANNEX I, paragraph 2, subparagraphs (b) and (c) of Directive 93/13/EEC (implemented into Bulgarian law by Article 144, Alinea 2 and 3 of the Consumers Protection Act) applicable to such clauses?
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The court partially rejected and partially awarded the plaintiff’s appeal and partially upheld and partially repealed the second instance court’s judgment.