ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Package travel and linked travel arrangements (Directive 2015/2302)

1. PURPOSE OF THE DIRECTIVE

Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package travel and linked travel arrangements, amending Regulation (EC) No 2006/2004 and Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC («Directive») aims at contributing to the proper functioning of the internal market and to the achievement of a high and as uniform as possible level of consumer protection by approximating certain aspects of the laws, regulations and administrative provisions of the Member States in respect of contracts between travellers and traders relating to package travel and linked travel arrangements

LEVEL OF HARMONIZATION: Article 4 provides that the Directive is a maximum harmonization Directive unless expressly stated otherwise in the Directive.

SCOPE: The Directive applies to packages offered for sale or sold by traders to travellers and to linked travel arrangements facilitated by traders for travellers. A “trader” is any natural person or any legal person, irrespective of whether privately or publicly owned, who is acting, including through any other person acting in his name or on his behalf, for purposes relating to his trade, business, craft or profession in relation to contracts covered by the Directive, whether acting in the capacity of organiser, retailer, trader facilitating a linked travel arrangement or as a travel service provider. In accordance with the definitions of the Directive:

• The Organiser is a trader who combines and sells or offers for sale packages, either directly or through another trader or together with another trader, or the trader who transmits the traveller’s data to another trader in accordance with Article 3(2)(b)(v)(2).
• A Retailer is a trader other than the organiser who sells, or offers for sale packages combined by an organiser.

A package in accordance with the Directive, means a combination of at least 2 different types of travel services for the purpose of the same trip or holiday provided that:

• those services are combined by one trader, including at the request of or in accordance with the selection of the traveller, before a single contract on all services is concluded; or
• irrespective of whether separate contracts are concluded with individual travel service providers, those services are:
• purchased from a single point of sale and those services have been selected before the traveller agrees to pay,
• offered, sold or charged at an inclusive or total price,
• advertised or sold under the term ‘package’ or under a similar term,
• combined after the conclusion of a contract by which a trader entitles the traveller to choose among a selection of different types of travel services, or
• purchased from separate traders through linked online booking processes where the traveller’s name, payment details and e-mail address are transmitted from the trader with whom the first contract is concluded to another trader or traders and a contract with the latter trader or traders is concluded at the latest 24 hours after the confirmation of the booking of the first travel service.

In relation to the definition of “travel service”, in accordance with Article 3(1), this may be either of the following:

• carriage of passengers;
• accommodation which is not intrinsically part of carriage of passengers and is not for residential purposes;
• rental of cars, other motor vehicles within the meaning of Article 3(11) of Directive 2007/46/EC of the European Parliament and of the Council (16), or motorcycles requiring a Category A driving licence in accordance with point (c) of Article 4(3) of Directive 2006/126/EC of the European Parliament and of the Council (17);
• any other tourist service not intrinsically part of a travel service within the meaning of points (a), (b) or (c);

In case the combination of travel services where not more than one type of travel service is combined with one or more tourist services as referred to in Article 3(1)(d) this is not a package in case the services of Article 3(1)(d):

PACKAGE TRAVEL CONTRACT: In accordance with the Directive, a package travel contract, is a contract on the package as a whole or, if the package is provided under separate contracts, all contracts covering travel services included in the package. In accordance with judgement C-400/00 the term covers trips which are organised by a travel agent following the request of and in accordance with the specifications of a consumer or limited group of consumers.

LINKED TRAVEL ARRANGEMENT: It is important to note that the Directive covers, in addition to packages, linked travel arrangements. Article 3(5) of the Directive interprets a linked travel arrangement as at least two different types of travel services purchased for the purpose of the same trip or holiday, not constituting a package, resulting in the conclusion of separate contracts with the individual travel service providers, if a trader facilitates:

Where not more than one type of travel service as referred to in Article 3(1)(a),(b) or (c) and one or more tourist services as referred to in Article 3(1)(d) are purchased, they do not constitute a linked travel arrangement if the latter services do not account for a significant proportion of the combined value of the services and are not advertised as, and do not otherwise represent, an essential feature of the trip or holiday.

WHERE THE DIRECTIVE DOES NOT APPLY: According to Article 2(2), the Directive does not apply in the following circumstances:

NATIONAL LAW: National law which relates to the rules of validity, formation or effect of a contract do not affect the Directive (Article 2(3)).

IMPERATIVE NATURE OF THE DIRECTIVE: Article 23 states that the nature of the Directive is imperative and a declaration by an organiser of a package or a trader facilitating a linked travel arrangement that he is acting exclusively as a travel service provider, as an intermediary or in any other capacity, or that a package or a linked travel arrangement does not constitute a package or a linked travel arrangement, shall not absolve that organiser or trader from the obligations imposed on them under this Directive. Also travellers may not waive the rights conferred on them by the national measures transposing this Directive.

2. SUBSTANTIVE PROVISIONS

2.1.                PROVISION OF INFORMATION

2.1.1.                     INFORMATION PRIOR TO THE CONCLUSION OF THE CONTRACT

By Article 5, the organiser and, where the package is sold through a retailer, also the retailer must provide the traveller with the standard information by means of the relevant form as set out in Part A or Part B of Annex I, in a clear, comprehensible and prominent manner:

Under the provisions of the Directive, for travel contracts concluded by telephone, the organiser, and where applicable, the retailer must provide the traveller with the standard information set out in Part B of Annex I, and the information set out in Article 5(1)(a) to (h).

Based on Article 5(2), where the package is of the type mentioned in Article 3(2)(b)(v), the organiser and the trader to whom the data are transmitted ensures that each of them provides, before the traveller is bound by a contract or any corresponding offer, the information set out in Article 5(1)(a) to (h) depending on the respective travel services they offer. The organiser also provides, at the same time, the standard information by means of the form set out in Part C of Annex I.

In accordance with Article 6(1), the organiser, and where applicable, the retailer shall communicate all changes to the pre-contractual information to the traveller in a clear, comprehensible and prominent manner before the conclusion of the package travel contract.

Where the organiser and, where applicable, the retailer has not complied with the information (as stated in Article 5(1)(c)) then Article 6(2) states that the traveller shall not bear those fees, charges or other costs.

BURDEN OF PROOF: The burden of proof that the information requirements have been complied with, is on the trader.

2.1.2.                     OTHER INFORMATION REQUIREMENTS CONNECTED WITH THE ORGANISED TRAVEL ARRANGEMENT

MANDATORY CHARACTER OF THE INFORMATION: According to Article 6(1), the information of Article 5(1)(a),(c),(d),(e) and (g) form an integral part of the package travel contract and cannot be altered unless the contracting parties expressly agree otherwise.

COPY OF THE CONTRACT AND REQUIREMENTS: Article 7(1) states that package travel contracts are in plain and intelligible language and, in so far as they are in writing, legible. At the conclusion of the package travel contract or without undue delay thereafter, the organiser or retailer shall provide the traveller with a copy or confirmation of the contract on a durable medium.

The traveller is entitled to request a paper copy if the package travel contract has been concluded in the simultaneous physical presence of the parties. In relation to off-premises contracts, a copy or confirmation of the package travel contract must be provided to the traveller on paper or, if the traveller agrees, on another durable medium.

By Article 7(2), the contract also includes the information of Article 5(1)(a) to (h) as well as the following information:

Article 7(3) states that where the package is of a type mentioned in Article 3(2)(b)(v), the trader shall inform the organiser of the conclusion of the contract leading to the creation of a package. The trader must also provide the organiser with the information necessary to comply with his obligations as an organiser. As soon as the organiser is informed that a package has been created, the organiser shall provide to the traveller the information referred to in Article 7(2)(a) to (h) on a durable medium.

INFORMATION TO BE PROVIDED PRIOR TO THE START OF THE PACKAGE: Article 7(5), states that prior to the start of the package, the organiser must provide the traveller with the necessary receipts, vouchers and tickets, information on the scheduled times of departure and, where applicable, the deadline for check-in, as well as the scheduled times for intermediate stops, transport connections and arrival.

BURDEN OF PROOF: The burden of proof that the information requirements have been complied with, is on the trader.

2.2.                OTHER OBLIGATIONS

2.2.1.                     CHANGES TO THE CONTRACT PRIOR TO THE START OF THE PACKAGE

TRANSFER OF THE PACKAGE TRAVEL CONTRACT TO ANOTHER TRAVELLER: According to Article 9, a traveller (“the transferor”) who gives reasonable notice prior to the start of the package (7 days are considered reasonable) in a durable medium that they will transfer the package travel contract to another person (“the transferee”), may do so provided that the transferee satisfies all the conditions applicable to that contract.

The organiser must then provide the transferor with proof of the additional fees, charges or other costs arising from the transfer of the package travel contract provided that these are reasonable and do not exceed the actual cost incurred by the organiser due to the transfer of the package travel contract.

Article 9(2) creates a joint and several obligation on the transferor and transferee for the balance due, and for any additional fees, charges or other costs arising from the transfer.

ALTERATION OF THE PRICE: Article 10 gives the right to increase the price only where the traveller has a parallel right of decrease. An increase in the price is possible only when the increase is a direct consequence of changes in:

Also, in the case of an increase in the total price of the package of more than 8%, then the provisions of Article 11(2) and (5) of the Directive apply which provide for the modification of the terms of the contract (supra next 2 paragraphs).

The price increase shall be possible only if the organiser notifies the traveller clearly and comprehensibly of it with a justification for that increase and a calculation, on a durable medium at the latest 20 days before the start of the package.

In accordance with Article 10(5), in case of a price reduction, the organiser shall have the right to deduct actual administrative expenses from the refund owed to the traveller. At the traveller’s request, the organiser shall provide proof of those administrative expenses.

ALTERATION OF OTHER PACKAGE TRAVEL CONTRACT TERMS: Article 11(1) states that the organiser may not unilaterally change package travel contract terms unless (a)
the organiser has reserved that right in the contract; (b) the change is insignificant; and (c) the organiser informs the traveller of the change in a clear, comprehensible and prominent manner on a durable medium.

Articles 11(2) and 11(5) states that whenever an organiser prior to the start of the package is constrained to alter significantly any of the main characteristics of the travel services as referred to in Article 5(1)(a) or cannot fulfil the special requirements as referred to Article 7(2)(a), or proposes to increase the price of the package by more than 8 %, the traveller may within a reasonable period specified by the organiser:

If the package travel contract is terminated and the traveller does not accept a substitute package, the organiser shall refund all payments made by or on behalf of the traveller without undue delay and in any event not later than 14 days after the contract is terminated. (Article 11(5))

The organiser, in case of changes in the terms, must without undue delay inform the traveller in a clear, comprehensible and prominent manner on a durable medium of:

In case the changes to the travel package result in a package of lower quality or cost, the traveller shall be entitled to an appropriate price reduction.

Finally, and in accordance with Article 11(5), in case that the consumer terminates the contract due to a change in its terms where the change is significant and in case the consumer does not accept another package, then the organiser must refund all payments made by or on behalf of the traveller without undue delay and in any event not later than 14 days after the contract is terminated.

TERMINATION OF THE CONTRACT:

• FROM THE TRAVELLER: In accordance with Article 12, the traveller may terminate the package travel contract at any time before the start of the package. Where the traveller terminates the package travel contract under this paragraph, the traveller may be required to pay an appropriate and justifiable termination fee to the organiser. The package travel contract may specify reasonable standardised termination fees based on the time of the termination of the contract before the start of the package and the expected cost savings and income from alternative deployment of the travel services. In the absence of standardised termination fees, the amount of the termination fee must correspond to the price of the package minus the cost savings and income from alternative deployment of the travel services. At the traveller’s request the organiser shall provide a justification for the amount of the termination fees.

The only case where a charge cannot be imposed on the traveller, is in the case of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and significantly affecting the performance of the package, or which significantly affect the carriage of passengers to the destination. In such a case, the traveller is entitled to a full refund of any payments made for the package, but shall not be entitled to additional compensation.

• FROM THE ORGANISER: The Organiser also has the right to terminate the package travel contract and provide the traveller with a full refund of any payments made for the package in case the former is prevented from performing the contract because of unavoidable and extraordinary circumstances. In such case the organiser must notify the traveller of the termination of the contract without undue delay before the start of the package.
• In the case of contracts with a minimum number of passengers, the organiser must notify the traveller of the termination of the contract within the period fixed in the contract, but not later than:

In the abovementioned cases, the organiser must provide the traveller with a full refund of any payments made for the package but is not liable for additional compensation.

RIGHT OF WITHDRAWAL: The only case where a genuine right of withdrawal is mentioned is Article 12(5). The Article is not mandatory in nature but it states that:

“With respect to off-premises contracts, Member States may provide in their national law that the traveller has the right to withdraw from the package travel contract within a period of 14 days without giving any reason.”

2.2.2.                     PERFORMANCE OF THE PACKAGE

PERFORMANCE OF THE PACKAGE: By virtue of Article 13, the Member States ensure that the organiser is responsible for the performance of the travel services included in the package travel contract, irrespective of whether those services are to be performed by the organiser or by other travel service providers. Also, Member States may maintain or introduce in their national law provisions under which the retailer is also responsible for the performance of the package. In such case, Article 7 and 9-12 apply to the retailer.

TRAVELLER LIABILITY: According to Article 13(2) the traveller must inform the organiser immediately (without undue delay) in relation to any lack of conformity which he perceives during the performance of a travel service included in the package travel contract.

ORGANISER LIABILITY: In such a case, the organiser must remedy the lack of conformity, unless that is impossible or it entails disproportionate costs, taking into account the extent of the lack of conformity and the value of the travel services affected. In the last two instances, Article 14 applies. Otherwise, Article 13(4) is applicable which states that:

“if the organiser does not remedy the lack of conformity within a reasonable period set by the traveller, the traveller may do so himself and request reimbursement of the necessary expenses. It shall not be necessary for the traveller to specify a time-limit if the organiser refuses to remedy the lack of conformity or if immediate remedy is required.”

OTHER OBLIGATIONS: In accordance with Article 13(5), when a large number of a significant proportion of the travel services cannot be provided as agreed in the package travel contract, the organiser must offer, at no extra cost to the traveller, suitable alternative arrangements of equivalent or higher quality than those specified in the contract (if that is possible), for the continuation of the package, including where the traveller’s return to the place of departure is not provided as agreed. Where this results in a package of lower quality than that specified in the package travel contract, the organiser shall grant the traveller an appropriate price reduction.

The traveller reserves the right to reject the proposed alternative arrangements only if they are not comparable to what was agreed in the package travel contract or the price reduction granted is inadequate.

In the cases where the lack of conformity substantially affects the performance of the package and the organiser has failed to remedy it within a reasonable period set by the traveller, the traveller may terminate the package travel contract without paying a termination fee and, where appropriate, request, in accordance with Article 14, price reduction and/or compensation for damages.

Where the traveller rejects the proposed alternative arrangements or where the alternative arrangement is impossible, the traveller is allowed to a price reduction and/or compensation in accordance with Article 14 without terminating the package travel contract.

If the package includes the carriage of passengers, the organiser shall, in the cases referred to in the first and second subparagraphs, also provide repatriation of the traveller with equivalent transport without undue delay and at no extra cost to the traveller.

IMPOSSIBILITY OF RETURN: According to Article 13(7):

“If it is impossible to ensure the traveller’s return as agreed in the package travel contract because of unavoidable and extraordinary circumstances, the organiser shall bear the cost of necessary accommodation, if possible of equivalent category, for a period not exceeding three nights per traveller. Where longer periods are provided for in Union passenger rights legislation applicable to the relevant means of transport for the traveller’s return, those periods shall apply”

Article 13(7) does not apply to persons with reduced mobility, and any person accompanying them, pregnant women and unaccompanied minors, as well as persons in need of specific medical assistance, provided that the organiser has been notified of their particular needs at least 48 hours before the start of the package.

REDUCTION OF THE PRICE AND COMPENSATION: Article 14, provides for a reduction in the price and the compensation allowed by the consumer. The Member States shall ensure that the traveller is entitled to an appropriate price reduction for any period during which there was a lack of conformity, unless the organiser proves that the lack of conformity (a) is attributable to the traveller or (b) attributable to a third party unconnected with the provision of the travel services included in the package travel contract and is unforeseeable or unavoidable or (c) is due to unavoidable and extraordinary circumstances.

Where the lack of conformity is due to the fault of the organiser, then, under Article 14(2), the traveller shall be entitled to receive appropriate compensation from the organiser for any damage which the traveller sustains as a result of any lack of conformity. The compensation is made without undue delay.

In accordance with the case law of the ECJ, Article 14 allows the consumer the right to be compensated for any moral damage which is due to the lack of conformity or non execution of the organised trip from the organiser or the trader.[1]

According to Article 14(6), the limitation period for introducing claims under this Article must not be less than two years.

OBLIGATION OF THE ORGANSIER TO PROVIDE ASSISTANCE: Article 16 states that Member States ensure that the organiser gives appropriate assistance without undue delay to the traveller in difficulty, in the following ways:

The same Article states that the organiser shall be able to charge a reasonable fee for such assistance if the difficulty is caused intentionally by the traveller or through the traveller’s negligence. It is to be noted however that such fee must not exceed the actual costs incurred by the organiser.

COMPLAINT MADE TO THE RETAILER: Article 15 states that Member States ensure that the traveller may address messages, requests or complaints in relation to the performance of the package directly to the retailer through which it was purchased. The retailer shall forward those messages, requests or complaints to the organiser without undue delay.

For the purpose of compliance with time-limits or limitation periods, receipt of the messages, requests or complaints referred to in the first subparagraph by the retailer shall be considered as receipt by the organiser.

2.2.3.                     INSOLVENCY PROTECTION

INSOLVENCY PROTECTION: Articles 17 and 18 refer to the protection of the traveller in the case where the organiser becomes insolvent.

Article 17 states that Member States ensure that organisers established in their territory provide security for the refund of all payments made by or on behalf of travellers insofar as the relevant services are not performed as a consequence of the organiser’s insolvency. If the carriage of passengers is included in the package travel contract, organisers shall also provide security for the travellers’ repatriation.

In case organisers are not established in a Member State but sell or offer for sale packages in a Member State, or they, by any means direct such activities to a Member State, they shall be obliged to provide the security in accordance with the law of that Member State.

NATURE OF THE GUARANTEE: According to case C-134/11, the scope of application of Article 17, includes the case where the insolvency of the organiser is also attributable to its own fraudulent behaviour.[2]

SCOPE OF THE GUARANTEE: The guarantee of Article 17(2) covers all costs which are  reasonably foreseeable and it also covers the amounts of payments made by or on behalf of travellers in respect of packages, taking into account the length of the period between down payments and final payments and the completion of the packages, as well as the estimated cost for repatriations in the event of the organiser’s insolvency.

Also, Article 17(3) states that regardless of the place of residence of the traveller, the place of departure or where the package is sold and irrespective of the Member State where the entity in charge of the insolvency protection is located, the traveller is offered with the same protection in relation to insolvency. It should be noted that the guarantee must cover the accommodation of the traveller prior to repatriation as well as any refunds for travel services which have not been performed without undue delay after the traveller’s request.

Article 18(1) states that Member States shall recognise as meeting the requirements laid down in the Directive when an organiser provides such measures.

In relation to traders who facilitate linked travel arrangements, Article 19 states that they must provide security or the refund of all payments they receive from travellers insofar as a travel service which is part of a linked travel arrangement is not performed as a consequence of their insolvency. If such traders are the party responsible for the carriage of passengers, the security shall also cover the traveller’s repatriation. It is also important to note that the trader who facilitates linked travel arrangement is always responsible to inform the traveller that he:

In case that the trader does not do so, then the rights and obligations mentioned in Articles 9 and 12 as well as Article 13 to 16 apply.

Finally, in accordance with Article 19(4), a linked travel arrangement is the result of the conclusion of a contract between a traveller and a trader who does not facilitate the linked travel arrangement, that trader shall inform the trader facilitating the linked travel arrangement of the conclusion of the relevant contract.

3. OTHER GENERAL PROVISIONS

WHEN THE ORGANISER IS OUTSIDE THE EEA: In accordance with Article 20, where the organiser is established outside the European Economic Area, the retailer established in a Member State shall be subject to the obligations laid down for organisers in Chapters IV and V (i.e. Articles 13 to 18), unless the retailer provides evidence that the organiser complies with those Chapters.

LIABILITY FOR BOOKING ERRORS: By Article 21, a trader who has agreed to arrange the booking of a package or of travel services which are part of linked travel arrangements, he shall be responsible for the errors made during the booking process.

RIGHT OF REDRESS: Article 22 states that where an organiser or a retailer pays compensation, grants price reduction or meets the other obligations incumbent on him under the Directive, Member States shall ensure that the organiser or retailer has the right to seek redress from any third parties which contributed to the event triggering compensation, price reduction or other obligations.

4. OBLIGATIONS OF MEMBER STATES

In accordance with Article 25, Member States take all necessary measures to lay down and implement rules on penalties applicable to infringements of national provisions adopted pursuant the Directive. The penalties provided for shall be effective, proportionate and dissuasive.

5. OTHER RELEVANT PROVISIONS

In accordance with Article 27, Regulation (EC) No 2006/2004 is amended and in accordance with Article 29 Directive 90/314/EEC is repealed with effect from 1 July 2018.

[1] C-168/00 – Simone Leitner v. TUI Deutschland GmbH & Co. KG

[2]  C-134/11 Jürgen Blödel-Pawlik v. HanseMerkur Reiseversicherung AG

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Misleading and comparative advertising (Directive 2006/114/EC)

Directive 2006/114/EC of the European Parliament and of the Council, of December 12, 2006, on misleading and comparative advertising (“Directive“) aims to protect traders from misleading advertising and its unfair consequences and to define the conditions under which comparative advertising is permitted. The Directive repealed Directive 84/450/EEC as it had been amended but several of the latter’s provisions remained intact – the jurisprudence of Directive 84/450/EEC therefore remains relevant

This Directive is related to Directive 2005/29/EC on unfair commercial practices, which we have already analyzed in Chapter 3, with the difference that the latter protects consumers while the former protects businesses.

LEVEL OF HARMONIZATION: The Directive is of minimal harmonization  and applies to “advertisements” which are either (1) misleading, or (2) unlawful comparative advertising, or both.

INTERPRETATION OF ADVERTISING:  Based on the Directive, advertising is interpreted as «the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations». The scope of the above interpretation is relatively broad, and it has been decided that even metatags consisting of keywords either embedded in website code or entered into a search engine, constitute advertising within its meaning. Likewise, using a domain name is considered advertising.

The reason it became necessary to control such advertisements is to protect against distortions of competition at EU level.

PROTECTION OF PROFESSIONALS: As mentioned above, the Directive is intended to protect professionals (i.e. traders) from misleading advertising by other businesses – i.e. it applies to B2B relationships which are considered unfair commercial practices.  This is because, in relation to consumer protection, Directive 2005/29/EC on unfair commercial practices applies. The Directive clarifies that its purpose is to protect traders from misleading advertising and its unfair consequences for them,  thus setting the minimum objective criteria for determining an advertisement as misleading.

PROTECTION OF TRADERS AND CONSUMERS:  Regarding non-permitted comparative advertising, however, the provisions of the Directive apply not only to B2B relationships but also apply to B2C relationships – that is, where a trader directs comparative advertising to consumers. The way this is achieved is through article 6(2)(a) of Directive 2005/29/EC which states that any practice which creates confusion, including through comparative advertising, with products, trademarks, trade names and other distinctive features of a competitor, is misleading. In other words, the consumer must refer to article 4 of Directive 2006/114/EC to check whether the conditions of permitted comparative advertising are met.

The provision of article 4(a) of the Directive operates in a similar way in relation to B2B transactions. That is, the article in question, which states that comparative advertising which is misleading is not allowed, essentially refers to Directive 2005/29/EC and an examination of articles 6 and 7 concerning misleading commercial practices.

Therefore, the Directive:

“… will either provide conditions for such assessment under the UCPD for B2C transactions or impose additional requirements which are relevant for traders, mainly competitors, in B2B transactions.”

MEANING OF TRADER: Based on the Directive, “trader” is any natural or legal person who is acting for purposes relating to his trade, craft, business or profession and anyone acting in the name of or on behalf of a trader.

1.   MISLEADING ADVERTISING

 INTERPRETATION:  Misleading advertising under article 4(b) is:

«… any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor»

Based on article 3, in order to assess whether an advertisement is misleading, all its features are taken into account and in particular any information concerning:

2.   COMPARATIVE ADVERTISING

WHAT IS COMPARATIVE ADVERTISING:  Comparative advertising based on the Directive is «any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor ».

PERMISSIBLE COMPARATIVE ADVERTISING:  The general perception as well as the course of jurisprudence to date, including the relevant Directive, is that comparative advertising is permissible. The reason given by the CJEU and the Directive is that it contributes:

“…in the objective presentation of the advantages of various comparable products and, therefore, in stimulating competition between suppliers of goods and services for the benefit of consumers, the conditions laid down for comparative advertising must be interpreted in the most favorable way.”

Indeed, consumers’ choices are widened when they are able to differentiate between goods – through this logic, it is legitimate to compare and promote product comparison through advertising.

At the same time, however, it must be ensured that comparative advertising is not used in a manner contrary to the rules of competition and unfairly or in a manner that affects the interests of consumers. That is, such advertising should be subject to rules that ensure transparency, prevent confusion and “motivate businesses to invest in the quality and image of their products”.

INTERPRETATION:  The broad interpretation of the concept of “comparative advertising” is intended to cover all forms of comparative advertising regardless of how the comparison is viewed – that is, whether it is directly or indirectly viewed. For example, where advertising refers to a type of product (even if no specific business or product is mentioned) that refers to a competitor, it is considered comparative advertising. This applies regardless of whether the reference concerns undertakings acting in concerto – i.e. together.

COMPETITIVE RELATIONSHIP:  From the above, it follows that it is necessary for a business, to be able to prove that it is a competitor of the advertiser, before making any claims against the advertised business.

Relevant is case C-381-05 where it was decided that for a case to fall within the Directive, there must be a competitive relationship between the advertiser and the business identified in the advertising message with reference to the products (goods or services) offered – that is, the existence of a relationship between businesses depends on the finding that the products they offer have some degree of substitutability – one for the other. To determine the existence of such a competitive relationship between products, the following shall be taken into account:

• the present state of the market and consumer habits as well as the possibilities of their evolution and the further potential for the substitution of products for one another which may be revealed by intensification of trade;
• the part of the Community territory in which the advertising is disseminated, without, however, excluding, where appropriate, the effects which the evolution of consumer habits seen in other Member States may have on the national market at issue and
• the particular characteristics of the product which the advertiser seeks to promote and the image which it wishes to impart to it.

CRITERIA OF COMPARATIVE ADVERTISING:  However, in order to allow comparative advertising, the following conditions must be cumulatively fulfilled in their entirety:

OBJECTIVITY:  An interesting case in the field of comparative advertising and the way objectivity is examined in relation to article 4(c) of the Directive, is case C-562/15 Carrefour Hypermarchés. In that case, Carrefour company (which operates various stores – including hypermarkets, supermarkets and other smaller stores), launched a television advertising campaign entitled “Lower Price Guarantee” in which it quoted comparative prices of other competing chains and offered consumers as refund, double the price difference in the event that they found any of the specific products at a lower price in a store other than Carrefour. What had been done, however, was that Carrefour had compared products of the Carrefour supermarket (and not of its smaller stores) with the smaller chain stores of its competitors – with the result that the price of Carrefour products was clearly lower.

Examining the issue, the CJEU stated that, as a general rule, article 4(c) of the Directive does not require that the category or size of the stores in which the products whose prices are compared are sold be similar. Also, comparing the prices of similar products sold in stores of a different category or size is permissible and does not oppose fair competition or the interests of consumers  provided, however, that (1) the conditions of article 4 are met and (2) the advertisement compares prices objectively and is not misleading.

Where, however, the stores whose prices have been obtained are members of chains each of which has a range of stores of different sizes and categories, and the advertiser compares the prices of stores of a larger size or higher category in his chain with those recorded in stores of a smaller size or lower category of competitive chains, without this element appearing in the advertisement, this may distort objectivity.

Similarly, an objective comparison cannot be made where, what is being compared is price, while the products being compared have different qualities without these qualities being mentioned in the advertisement.

MISLEADING ADVERTISING:  Regarding article 4(a) of the Directive, the CJEU decided that comparative advertising is misleading where, in any way, by act or omission, it misleads consumers it is addressed to and influences their economic behaviour or, for these reasons, it harms a competitor.  It is important to mention that, although the CJEU recognized that under article 7 of Directive 2005/29/EC, restrictions on the medium in which the advertisement is shown may be taken into account for whether there is a misleading omission, in such circumstances, these limitations did not justify the omission of essential information about store differences.  That is, the information should not only be clear, but should also be included in the advertising medium itself.

DESIGNATION OF ORIGIN:  In relation to article 4(e), and products with a designation of origin, case C-381-05 is relevant  where the question was whether beer could be compared to champagne. It was decided that for products that do not have a designation of origin, any comparison with products that have a designation of origin is not prohibited.

TRADEMARKS:  With reference to article 4(d) and (f) – (h) and the use of trademarks, it should be noted that comparative advertising that makes reference to competitors’ trademarks is permissible, given that it complies with the provisions of the Directive.

However, it is impermissible (especially in relation to articles 4(f) – (h)) to use trademarks, brands or other distinguishing marks of a competitor to promote the advertiser’s products. Nor is it permissible for someone to copy a competitor’s mark and state above that the product (which the mark represents) is an imitation, since in this way he effectively usurps and unfairly benefits from the reputation of the mark.

METATAGS:  Also of interest is the use of competitor brand metatags to attract consumers to websites. Such practice may be considered trademark infringement – but is there a way for it to be considered permissible comparative advertising?

The answer seems to be negative since it is difficult for the advertiser to be able to convince that the use of competitor metatags is not misleading and/or that it is not taking unfair advantage of the competitor’s trademark.

3.   ROLE OF MEMBER STATES

Based on article 5 of the Directive MSs should provide appropriate and effective means to combat misleading advertising and enforce compliance with the provisions on comparative advertising in the interest of traders and competitors. Such means include:

• Right to take legal action against the said advertisement or
• File a complaint against the advertisement before an administrative authority which is competent to either decide on the complaint or refer the matter to the competent court.

EXERCISE OF RIGHTS BY ORGANIZATIONS: The above rights are exercised by anyone with a legal interest including organizations.

MSs may also decide that before a court or administrative body can take up a dispute, other existing means of dealing with complaints should first be resorted to, including means such as voluntary control of such advertising by independent bodies.

APPEAL BY A CODE OWNER:  Also, the MSs can decide whether appeals can be brought separately or jointly against a number of traders in the same economic sector and whether these appeals can be brought against a code owner, if the code in question promotes non-compliance with any legal provisions.  According to the Directive, a “code owner” is:

“…any entity, including a trader or group of traders, which is responsible for the formulation and revision of a code of conduct and/or for monitoring compliance with the code by those who have undertaken to be bound by it.”

The MSs, in accordance with article 5(3), are required to confer on the courts or administrative authorities powers under which they may, when they consider such measures necessary and, taking into account all the interests involved and in particular the public interest: order the cessation of misleading advertising or unauthorized comparative advertising, or initiate the appropriate legal proceedings for this purpose or, if the misleading advertisement or unauthorized comparative advertising has not yet been published, but its publication is imminent, prohibit it or initiate the relevant legal proceedings to ban this publication even if actual damage or harm, fraud or negligence on the part of the trader is not proven. Based on the same article, the MSs should ensure that the measures referred to in this paragraph can be taken within the framework of an expedited procedure, either with temporary or final effect.

In addition, in order to eliminate the continuing effects of misleading advertising or unlawful comparative advertising, the cessation of which has been ordered by a final decision, the MSs may confer on the courts or administrative authorities powers under which they may require the publication of the decision (in whole or in part in such form as they deem fit) and/or require the publication of a remedial statement.

Administrative bodies should, among other things, justify their decisions.

PROOF OF CLAIMS:  Under article 7, MSs should confer powers on courts or administrative authorities to require the advertiser to provide evidence of the accuracy of the factual claims contained in the advertisement, if deemed necessary on the basis of the data of the specific case and taking into account the legitimate interests of the advertiser and in the case of comparative advertising to require that the advertiser present these evidence in a short period of time and in the event that he does not do so or where the claims are inaccurate, then these are considered inaccurate.

RIGHTS OF MSs:  Based on article 8(1), MSs may adopt provisions which provide greater protection to traders and competitors against misleading advertising (but not comparative advertising as far as the comparison is concerned).

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Representative Actions for the Protection of the Collective Interests of Consumers (Directive (EU) 2020/1828)

1. PURPOSE OF THE DIRECTIVE

Collective redress has been a very important issue for the EU since the 1980s and has been in policy debates for at least the past 20 years.  Its scope is wide and it is not difficult to envisage situations where collective redress of consumers is not only mandatory as a matter of policy, but it is also necessary as a matter of logic as it allows consumers’ access to courts to low value claims: one doesn’t have to look further than the Diesel gate scandal to see the reasons that such redress is welcome. The idea of collective redress for consumers is simple: it prominently addresses situations where there is minor harm to many consumers thereby making it worthwhile to pursue the harm in a collective form rather than individually.

The Injunctions Directive (Directive 2009/22/EC on injunctions for the protection of consumer interests), enabled consumer organisations and public authorities to seek injunctions against traders when the latter were breaching EU Consumer law. Its scope was limited in the sense that only 12 consumer law directives were covered by its ambit and because only injunctive relief could be sought by it.

The New Deal for Consumers envisaged higher protection for consumers including collective redress mechanisms for compensation. This led to the implementation of Directive 2020/1828 which includes mechanisms for collective redress including “compensation, repair, price reduction, contract termination or reimbursement of the price paid, as appropriate and as available under Union or national law”

Directive (EU) 2020/1828 OF THE EUROPEAN Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (“The Directive”) sets out rules to ensure that a representative action mechanism for the protection of the collective interests of consumers is available in all Member States (“MS”), while providing appropriate safeguards to avoid abusive litigation. The purpose of the Directive is twofold. Firstly, through the achievement of a high level of consumer protection, to contribute to the proper functioning of the internal market by approximating certain aspects of the laws, regulations and administrative provisions of the Member States concerning representative actions and secondly it aims to improve consumers’ access to justice.

The Directive covers representative actions that are brought on or after 25 June 2023. For representative actions filed before 25 June 2023, it is Directive 2009/22/EC that applies.

LEVEL OF HARMONISATION: The Directive is a full harmonisation directive and Member States (“MS”) may not derogate from its provisions except to the extent that they adopt procedural rules for the registration of representative actions. In this light, Article 1(2) of the Directive states that Member States may adopt or retain in force procedural means for the protection of the collective interests of consumers at national level.

The Directive covers actions on behalf of consumers but MSs are free if they wish to include additional areas of law as well as persons benefiting from it (such as small businesses). Under it, consumers may not bring proceedings alone for collective redress but only through a “qualified entity”.

The procedural law used for registration of representative actions is that provided under EU or national law.

SCOPE: According to Article 2(1) the Directive applies:

“…to representative actions brought against infringements by traders of the provisions of Union law referred to in Annex I, including such provisions as transposed into national law, that harm or may harm the collective interests of consumers. This Directive is without prejudice to the provisions of Union law referred to in Annex I. It applies to domestic and cross-border infringements, including where those infringements ceased before the representative action was brought or where those infringements ceased before the representative action was concluded.”

ANNEX: The Annex contains 66 directives and regulations and articles of such directives and regulations for which a representative action may be registered. The Annex includes financial services, data protection, health, cosmetics, food, energy, product liability, provision of services and sale of goods. It is important to note at this stage that the use of the Directive can be extended to the registration of representative actions in relation to the General Data Protection Regulation (EU) 2016/679 regardless of the fact that there is a separate provision in the Regulation itself for consumer representation under Article 80(1) of that Regulation.

DEFINITION OF CONSUMER AND TRADER: The definitions of consumer and trader as used in the Directive are similar as those used in other Directives. In particular, consumer “means any natural person who acts for purposes which are outside that person’s trade, business, craft or profession” while “trader” “means any natural person, or any legal person irrespective of whether privately or publicly owned, that acts, including through another person acting in that person’s name or on that person’s behalf, for purposes relating to that person’s trade, business, craft or profession”.

REPRESENTATIVE ACTION: A “representative action” is defined as an action for the protection of the collective interests of consumers that is brought by a qualified entity on behalf of consumers to seek an injunctive measure, a redress measure, or both.

There are two types of representative actions. Domestic and cross-border.

Domestic representative action means a representative action brought by a qualified entity in the Member State in which the qualified entity was designated. Cross-border representative action means a representative action brought by a qualified entity in a Member State other than that in which the qualified entity was designated.

COLLECTIVE INTERESTS OF CONSUMERS: Collective interests of consumers means the general interest of consumers and, in particular for the purposes of redress measures, the interests of a group of consumers.

REDRESS MEASURE: “Redress measures” are defined in the Directive as measures that require a trader to provide consumers concerned with remedies such as compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid, as appropriate and as available under Union or national law.

2. SUBSTANTIVE PROVISIONS

2.1.   REPRESENTATIVE ACTIONS

2.1.1.              Qualified criteria

QUALIFIED ENTITIES: Qualified entity under the Directive means any organisation or public body representing consumer interests which has been designated by a Member State as qualified to bring representative actions in accordance with this Directive.

In accordance with article 4(1) of the Directive,  Member States must ensure that representative actions are brought only by qualified entities . Such entities may be consumer organisations that represent members from more than one Member State.

QUALIFIED CRITERIA FOR CROSS-BORDER REPRESENTATIVE ACTIONS: Under the Directive there are specific criteria that apply to cross-border representative actions. In particular, according to Article 4(3), in order for such an entity to be able to bring cross-border representative actions, it must fulfil the following criteria:

«a)       it is a legal person that is constituted in accordance with the national law of the Member State of its designation and can demonstrate 12 months of actual public activity in the protection of consumer interests prior to its request for designation.

b) its statutory purpose demonstrates that it has a legitimate interest in protecting consumer interests as provided for in the provisions of Union law referred to in Annex I.

c) it has a non-profit-making character.

d) it is not the subject of insolvency proceedings and is not declared insolvent.

e) it is independent and not influenced by persons other than consumers, in particular by traders, who have an economic interest in the bringing of any representative action, including in the event of funding by third parties, and, to that end, has established procedures to prevent such influence as well as to prevent conflicts of interest between itself, its funding providers and the interests of consumers.

f) it makes publicly available in plain and intelligible language by any appropriate means, in particular on its website, information that demonstrates that the entity complies with the criteria listed in points (a) to (e) and information about the sources of its funding in general, its organisational, management and membership structure, its statutory purpose and its activities.”

QUALIFIED CRITERIA FOR DOMESTIC REPRESENTATIVE ACTIONS: With regard to the criteria applicable to domestic representative actions, there are no specific criteria that should be set, but generally, MSs have to ensure that the criteria they use to designate an entity as a qualified entity, are consistent with the objectives of this Directive in order to make the functioning of such representative actions effective and efficient  and, if they so wish, they may set the same criteria as those applicable to cross-border representative actions.

It should be noted that, notwithstanding Articles 4(3) and 4(4), MSs may also designate public bodies as legal entities for the purpose of pursuing representative actions.

Foreign and Domestic qualified entities may join forces and bypass the stricter requirements set by the Directive relating to approving a foreign entity (vis-a-vis a domestic entity). In this way, the domestic entity will act as the anchor claimant and “bypass the stricter requirements for foreign qualified entities”

The criteria for designation as a cross-border qualified entity are considered as minimum harmonization.

AD HOC APPOINMENT: Article 4(6) provides for the case where someone may make an application for qualification to register, on an ad hoc basis, a specific domestic representative action. This article states that this is possible given that it meets the criteria for designation as a qualified entity under national law.

EXISTING QUALIFIED ENTITIES: According to Article 4(7), Member States may provide that public bodies already designated as qualified entities based on Directive 2009/22/EC are to remain designated as qualified entities for the purposes of the Directive.

2.1.2.              EXERCISE OF REPRESENTATIVE ACTIONS

According to Article 7(1), Member States ensure that representative actions as provided for by the Directive can be brought before their courts or administrative authorities by qualified entities since such cases are not manifestly unfounded. In the latter case, Member States must ensure that courts or administrative authorities are able to dismiss such cases at the earliest possible stage of the proceedings in accordance with national law.

Where a qualified entity will bring a representative action, they need to provide the court or administrative authority with sufficient information about the consumers concerned by the representative action.

The Directive states that Member States must ensure that qualified entities are entitled to seek at least (a) injunctive measures or (b) redress measures and this can be done in the context of a single representative action.

INJUCTIVE MEASURES: In relation to injuctive measures, Article 8(1) states that they are available in the form of:

“a)        a provisional measure to cease a practice or, where appropriate, to prohibit a practice, where that practice has been deemed to constitute an infringement …·

b) a definitive measure to cease a practice or, where appropriate, to prohibit a practice, where that practice has been found to constitute an infringement …”

With regard to definitive measures for ceasing/prohibiting a practice, it is stated that such a measure may include, if provided for in national law:

“a)       a measure establishing that the practice constitutes an infringement …· and b) an obligation to publish the decision on the measure in full or in part, in such form as the court or administrative authority considers appropriate, or an obligation to publish a corrective statement..”

Also, MSs may foresee that a qualified entity is only allowed to seek the injunctive measure applying for a definitive measure for ceasing/prohibiting a practice after it has entered into consultations with the trader concerned with the aim of having that trader cease the infringement. Where such provision is made, if the trader does not cease the infringement within two weeks of receiving a request for consultation, the qualified entity may immediately bring a representative action for an injunctive measure.

Note that the consumers concerned by a representative action must be entitled to benefit from the above measures but without being required to express their wish to be represented by that qualified entity. In fact, prior to the issuance of the injunctive measure, the qualified entity must not be required to prove:

«a)       actual loss or damage on the part of the individual consumers affected by the infringement; or

b) intent or negligence on the part of the trader. »

It is noted that in relation to representative actions concerning injunctions, it is provided that the MSs:

“…ensure that they are suspending or interrupting applicable limitation periods in respect of the consumers concerned by that representative action, so that those consumers are not prevented from subsequently bringing an action for redress measures concerning the alleged infringement …  because the applicable limitation periods expired during the representative action for those injunctive measures.”

PROCEDURAL EXPEDIENCY: Regarding the speed of issuing injunctions, the Directive states that MSs must ensure that representative actions are dealt with speedily whereas, representative actions seeking an injunction to cease or, where appropriate, to prohibit a practice considered to constitute an infringement must, where appropriate, be dealt with by a summary procedure.

REDRESS MEASURES: A redress measure must require a trader to provide consumers concerned with remedies such as compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid, as appropriate and as available under Union or national law.

INCLUSION OF CONSUMERS IN REPRESENTATIVE ACTIONS: According to Article 9(2), MSs must lay down rules on how and at which stage of a representative action for redress measures the individual consumers concerned by that representative action are to be represented by the qualified entity in that representative action and whether they will be bound or not by the outcome of the representative action. The choice may be explicit or tacit and it may be made within an appropriate time limit after that representative action has been brought. Where a representative action concerning remedies and/or redress is pending, MSs must adopt rules to ensure that consumers are informed of the representative action in good time and by appropriate means so that they are given the opportunity to express or imply their wish to be represented in the representative action.

Where a redress measure does not specify individual consumers entitled to benefit from remedies provided by the redress measure, it must at least describe the group of consumers entitled to benefit from those remedies. Indeed, MSs must ensure that a redress measure enables consumers to benefit from the remedies provided by that redress measure without the need to bring a separate action.

DOUBLE COMPENSATION: In cases where consumers have expressly or implicitly expressed their wish to be represented in a representative action, MSs must ensure that such consumers cannot be represented (1) in other representative actions on the same subject matter and against the same trader, or (2) in individual actions on the same subject matter and against the same trader. MSs must also establish rules to ensure that consumers do not receive compensation in more than one action on the same subject matter against the same trader.

Where consumers do not have their habitual residence in the MS of the court or administrative authority before which a representative action is brought, they are obliged to express their wish to be represented in that representative action so that those consumers are bound by the outcome of that representative action.

ADDITIONAL MEASURES OF PROTECTION: It should be noted that the remedies provided by redress measures within a representative action are without prejudice to any additional remedies available to consumers under Union or national law which were not the subject of that representative action.

Article 9(7) of the Directive states that Member States must lay down or retain rules on time limits for individual consumers to benefit from redress measures. MSs may lay down rules on the destination of any outstanding redress funds that are not recovered within the established time limits.

Finally, it should be said that qualified entities are able to bring representative actions for a redress measure without it being necessary for a court or administrative authority to have previously established an infringement.

In relation to limitation periods, where there is an ongoing representative action requesting a redress measure and/or representative action, MSs must ensure that the applicable limitation periods are suspended or interrupted in respect of the consumers concerned by the representative action.

SPECIAL PROVISIONS FOR CROSS-BORDER ACTIONS: In accordance with Article 6(1), MSs must ensure that legal entities designated by another MS for the purpose of bringing cross-border representative actions may bring such actions before their courts or administrative authorities. In this sense, the Directive forces MSs to allow consumers to benefit from a representative action without the need to bring a separate individual action.

Also, MSs must ensure that where the alleged infringement of Union law affects or is likely to affect consumers in different MSs, the representative action can be brought before the court or administrative authority of a MS by several qualified entities from different MSs in order to protect the collective interests of consumers in different MSs.

INFORMATION FROM QUALIFIED ENTITIES: Regarding information to the public, Article 13(1) states that MSs must lay down rules ensuring that qualified entities provide information, in particular on their website, about:

“a)       the representative actions they have decided to bring before a court or administrative authority.

b) the status of the representative actions they have brought before a court or administrative authority; and

c) the outcomes of the representative actions referred to in points (a) and (b).”

Similarly, Article 13(4) states that legitimate operators should inform consumers about final decisions to reject, as inadmissible or unfounded, representative claims for remedies and/or redress.

Based on Article 13(5), Member States must ensure that the successful party can recover the costs related to providing information to consumers in the context of the representative action.

INFORMATION FROM TRADERS: According to Article 13(3) of the Directive, unless consumers are informed of the final decision or approved settlement by other means, the court or administrative authority must require the trader to inform the consumers concerned by the representative action, at the trader’s expense, of any final decision or approved settlement, by means appropriate to the circumstances of the case and within specified time limits, where appropriate, informing all consumers concerned individually. MSs may derogate from this obligation by adopting rules under which the trader will be required to provide such information to consumers only at the request of the qualified entity.

FINAL DECISIONS: According to Article 15 of the Directive, Member States shall ensure that the final decision of a court or administrative authority concerning the existence of an infringement harming collective interests of consumers can be used by all parties as evidence:

“…in the context of any other action before their national courts or administrative authorities to seek redress measures against the same trader for the same practice, in accordance with national law on evaluation of evidence.”

2.1.3.              Applicable Law

Recital 21 states that Regulation (EC) No 864/2007, Regulation (EC) No 593/2008 and Regulation (EU) No 1215/2012 of the European Parliament and of the Council should apply to the procedural mechanism for representative actions required by this Directive. Important guidance on the law applicable to representative actions is given in the judgment C-191/15 Verein für Konsumenteninformation κατά Amazon EU Sàrl. This case concerned the repealed Directive 2009/22/EC but it is also relevant in the Directive under consideration. It was decided that the applicable law for the assessment of a particular contractual term must always be determined by applying Regulation 593/2008 (Rome I), whether it is an individual action or a collective action. However, where it is a collective action which seeks to protect consumers’ interests against the use of unfair terms in general terms of sale, this is determined on the basis of Regulation 864/2007 (Rome 2).

This retains the system of international jurisdiction established in Regulation 1215/2012. In addition to automatic recognition of the standing of a qualified entity designated in one Member State to bring actions in other Member States, the directive envisages the promotion of cooperation between such entities to facilitate actions with cross-border implications. It also places an obligation on Member States to provide mechanisms to enable consumers habitually resident in one Member State to be represented in compensatory collective redress actions brought in another Member State.

2.1.4.              Funding of Representative Actions and Expenses

Α. FINANCING OF REPRESENTATIVE ACTIONS

Article 10 refers to the funding of representative actions for redress measures.  As stated by D. Fairgrieve και τον R. Salim:

“Whilst the Directive recognises the importance of consumers being informed, the disparity in the level of guidance provided to Member States on the content of the information obligations on ongoing claims and final decisions/settlements risks consumers being unable to adequately make decisions/take actions with regards to such claims”

Given that collective redress cases “tend to come with a particularly significant price tag” stemming from the complications of such actions, as the name suggests, “third party funding” is the case where third parties fund the collective redress procedure in return for a share of the recovered sums. Third-party funding has a number of advantages. Most importantly, it provides liquidity to pay fees and expenses to fund the litigation and furthermore, it reduces significantly the financial risk of the litigation.

OPTIONS FOR FUNDERS: The options for funders to obtain their return on investment seem to be the following:

• The funder receives a part of the damages award (thereby consumers receive a deducted amount)
• The funder receives a costs order against the defendants – something which is however limited by the Directive given that it “restricts adverse cost orders to costs that were necessary”.
• The funder receives remuneration from funds that were not claimed by consumers under the time limit provided for by article 9(7) of the Directive.

THIRD PARTY FUNDING: In the event that such actions are funded by a third party, to the extent that this is, permitted by national law, the MSs must ensure that conflicts of interests are prevented and that funding by third parties that have an economic interest in the bringing or the outcome of the representative action for redress measures does not divert the representative action away from the protection of the collective interests of consumers.  MSs, on the basis of Article 10(2) of the Directive, should also ensure that:

“a)       the decisions of qualified entities in the context of a representative action, including decisions on settlement, are not unduly influenced by a third party in a manner that would be detrimental to the collective interests of the consumers concerned by the representative action.

b) the representative action is not brought against a defendant that is a competitor of the funding provider or against a defendant on which the funding provider is dependent. “

In relation to article 10(2)(a), what constitutes “undue influence” is difficult to tell.

Regarding the courts and administrative authorities having jurisdiction in representative actions for redress measures, the following is derived from the Directive:

1. That they will assess compliance in the event that justified doubts may arise as to such compliance. To this end, qualified entities must disclose to the court or administrative authority a financial overview that lists sources of funds used to support the representative action.
2. Are empowered to take appropriate measures, such as requiring the qualified entity to refuse or make changes in respect of the relevant funding and, if necessary, rejecting the legal standing of the qualified entity in a specific representative action. If the legal standing of the qualified entity is rejected in a specific representative action, that rejection is not to affect the rights of the consumers concerned by that representative action.

B. EXPENSES

In accordance with Article 12(1), MSs must ensure that the unsuccessful party in a representative action for redress measures is required to pay the costs of the proceedings borne by the successful party, in accordance with conditions and exceptions provided for in national law applicable to court proceedings in general. It is noted that individual consumers concerned by a representative action for redress measures must not pay the costs of the proceedings, unless the expenses were caused as a result of their intentional or negligent conduct.

The above article is somewhat limited in favour of the legal entities since the Directive states that Member States shall take measures aiming to ensure that the costs of the proceedings related to representative actions do not prevent qualified entities from effectively exercising their right to seek the measures referred to in Article 7. These measures may take the form of public funding, including structural support for qualified entities, limitation of applicable court or administrative fees, or access to legal aid.

With regard to consumers who are represented by a qualified entity, it is noted that MSs may establish rules under which they may require such consumers to pay a limited registration fee or similar charge in order to participate in a representative action involving redress measures.

2.1.5.              Settlements

According to Article 11(1) of the Directive, for the purpose of approving settlements, MSs must ensure that in a representative actions for redress measures:

“a)       the qualified entity and the trader may jointly propose to the court or administrative authority a settlement regarding redress for the consumers concerned; or

b) the court or administrative authority, after having consulted the qualified entity  and the trader, may invite the qualified entity and the trader to reach a settlement regarding redress within a reasonable time limit.”

Such settlements are subject to the control of the court or administrative authority which must assess whether to approve or reject such a settlement taking into account whether the settlement: (1) is contrary to provisions of national mandatory law, or (2) contains terms that cannot be enforced and whether (3) the rights and interests of all parties, and in particular those of the consumers concerned, are affected. Also, MSs may lay down rules to allow the court or administrative authority to refuse to approve a settlement on the grounds that the settlement is unfair.

When the settlement is approved, it is binding upon the qualified entity, the trader and the individual consumers concerned. provided that the MSs may lay down rules that give the individual consumers concerned by a representative action and by the subsequent settlement the possibility of accepting or refusing to be bound by settlements.

Redress obtained through an approved settlement, is without prejudice to any additional remedies available to consumers under Union or national law which were not the subject of that settlement.

REJECTION OF THE SETTLEMENT: If a settlement is not approved, the court or administrative authority continues to hear the relevant representative action.

DISCLOSURE OF EVIDENCE: Article 18 of the Directive states that the MSs shall:

“…ensure that, where a qualified entity has provided reasonably available evidence sufficient to support a representative action, and has indicated that additional evidence lies in the control of the defendant or a third party, if requested by that qualified entity, the court or administrative authority is able to order that such evidence be disclosed by the defendant or the third party in accordance with national procedural law, subject to the applicable Union and national rules on confidentiality and proportionality. Member States shall ensure that, if requested by the defendant, the court or administrative authority is also able to equally order the qualified entity or a third party to disclose relevant evidence, in accordance with national procedural law.”

3. INFORMATION AND OTHER OBLIGATIONS

ELECTRONIC DATABASES: According to Article 14(1), MSs may set up national electronic databases that are publicly accessible through websites and which provide information on qualified entities designated in advance for the purpose of bringing domestic and cross-border representative actions and general information on ongoing and concluded representative actions. Such electronic databases must be notified to the Commission. The Commission must in turn maintain an electronic database  which is accessible from:

“a)       the national contact points

b) courts and administrative authorities, if necessary under national law;

c) qualified entities designated by the Member States for the purpose of bringing domestic representative actions and cross-border representative actions; and

d) the Commission.”

PENALTIES:  According to article 19(1), MSs must lay down the rules on penalties applicable to the failure or refusal to comply with an injunctive measure, measures for the notification of evidence, and cases falling under Article 13(3). The penalties must be effective, proportionate, and dissuasive and shall, inter alia, take the form of fines.

COOPORATION BETWEEN QUALIFIED ENTITIES: According to Article 20(4), MSs and the Commission must support and facilitate cooperation between qualified entities and the exchange and dissemination of their best practices and experience as regards dealing with domestic infringements and cross-border infringements.

MONITORING AND EVALUATION: According to Article 23(1), the Commission must carry out an evaluation of the Directive and submit a report. The MSs have a corresponding obligation to provide the Commission with information on the number and type of representative actions completed, the type of infringements and the results of these representative actions.

REPEAL: Directive 2009/22/EC is repealed with effect from 25 June 2023.

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Timeshare, Long-term Holiday Product, Resale and Exchange Contracts (Directive 2008/122/EC)

1. PURPOSE OF THE DIRECTIVE

Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts («Directive») is intended to contribute to the proper functioning of the internal market and to achieve a high level of consumer protection, by approximating the laws, regulations and administrative provisions of the Member States in respect of certain aspects of the marketing, sale and resale of timeshares and long-term holiday products as well as exchange contracts.

LEVEL OF HARMONISATION: Based on recitals 3 and 11, the Directive is a full harmonisation directive except where otherwise indicated in specific provisions (such as the effects of the right of withdrawal to relationships outside the scope of the Directive).

IMPERATIVE NATURE OF THE DIRECTIVE: According to Article 12, consumers may not waive their rights under the Directive. Also where the applicable law is that of a third country, consumers are subject to the protection of the MS where the property is situated or in the case of a contract not directly related to immovable property, in the Member State, the trader pursues commercial or professional activities in a Member State or, by any means, directs such activities to a Member State and the contract falls within the scope of such activities.

SCOPE: The Directive applies to trader-to-consumer transactions which relate to the marketing, sale and resale (a) of timeshares, (b) long-term holiday products as well as (c) exchange contracts.

THE THREE TYPES OF TRANSACTIONS: According to the interpretative provisions of the Directive, the three types of transactions covered, namely timeshare, long-term holiday products and exchange contracts, are interpreted as follows:

(a) Timeshare contract is “a contract of a duration of more than one year under which a consumer, for consideration, acquires the right to use one or more overnight accommodation for more than one period of occupation”. Contracts for multiple reservations of accommodation (e.g. hotel rooms) in so far as multiple reservations do not imply rights and obligations beyond those arising from separate reservations cannot be considered as timeshares.

(b) Long-term holiday product is “a contract of a duration of more than one year under which a consumer, for consideration, acquires primarily the right to obtain discounts or other benefits in respect of accommodation, in isolation or together with travel or other services” . Long-term holiday product contracts should not be understood as covering ordinary loyalty schemes which provide discounts on future stays in the hotels of a hotel chain, since membership in the scheme is not obtained for consideration nor is the consideration paid by the consumer primarily for the purpose of obtaining discounts or other benefits in respect of accommodation.

(c) Exchange contract is “a contract under which a consumer, for consideration, joins an exchange system which allows that consumer access to overnight accommodation or other services in exchange for granting to other persons temporary access to the benefits of the rights deriving from that consumer’s timeshare contract”

In calculating the duration of a timeshare contract or a long-term holiday product contract, any provision in the contract allowing for tacit renewal or prolongation is taken into account.

As mentioned above, the Directive also covers cases of the resale of such contracts. Named as “resale contract”, there are contracts where “a trader, for consideration, assists a consumer to sell or buy a timeshare or a long-term holiday product”.

CONSUMER AND TRADER: A consumer is defined as a natural person who is acting for purposes which are outside that person’s trade, business, craft or profession. On the other hand, trader is defined as “a natural or legal person who is acting for purposes relating to that person’s trade, business, craft or profession and anyone acting in the name of or on behalf of a trader.”

The Directive does not affect national legislation which:

“a)       provides for general contract law remedies.

b) relates to the registration of immovable or movable property and conveyance of immovable property

c) relates to conditions of establishment or authorisation regimes or licensing requirements and

d) relates to the determination of the legal nature of the rights which are the subject of the contracts covered by this Directive.”

2. SUBSTANTIVE PROVISIONS

2.1.   INFORMATION/OBLIGATIONS PRECEDING THE COLCLUSION OF THE CONTRACT

2.1.1.                INFORMATION IN ADVERTISING

According to article 3, each advertisement must indicate the possibility of obtaining the following information provided in Annexes I to IV and the source of the information :

“a)       in the case of a timeshare contract: by means of the standard information form as set out in Annex I and information as listed in Part 3 of that form.

b) in the case of a long-term holiday product contract: by means of the standard information form as set out in Annex II and information as listed in Part 3 of that form;

c) in the case of a resale contract: by means of the standard information form as set out in Annex III and information as listed in Part 3 of that form.

d) in the case of an exchange contract: by means of the standard information form as set out in Annex IV and information as listed in Part 3 of that form.”

PROMOTION OR SALES EVENT: Where during an event for the promotion or sale of products the trader proposes contracts for timeshare, long-term holiday products, resale or exchange then the trader must clearly state in the invitation the commercial purpose and nature of the event. Also, the above information shall be available to the consumer at any time during the event.

Based on article 3(4) of the Directive, a timeshare or a long-term holiday product must not be marketed or sold as an investment.

2.1.2.                PRE – CONTRACTUAL INFORMATION

Article 4 of the Directive states that the trader must, provide the consumer, before the consumer is bound by any contract, the information (Annex I – IV) referred to in the immediately preceding section in a clear and comprehensible manner. The information must be provided, free of charge, by the trader on paper or on another durable medium which is easily accessible to the consumer. Also, the information must be drawn up in the language  of the Member State in which the consumer is resident or a national, at the choice of the consumer.

DURABLE MEDIUM: According to the interpretative provisions of the Directive, durable medium “means any instrument which enables the consumer or the trader to store information addressed personally to him in a way which is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored”

Also, based on article 5(4), before the conclusion of the contract the trader must explicitly draw the consumer’s attention to the existence of the right of withdrawal, the length of the withdrawal period referred to in article 6, and the ban on advance payments during the withdrawal period referred to in article 9.

2.2.   OBLIGATIONS INHERENT IN THE CONTRACT AND INFORMATION  

Based on article 5(1), the timeshare, long-term holiday product, resale or exchange contract must be in writing, on paper or on another durable medium, and drawn up in the language or one of the languages of the MS in which the consumer is resident or a national, at the choice of the consumer, provided it is an official language of the Community.

The MSs where the consumer resides have the right, based on the same article, to additionally require:                                                                                                                                                                     

“a) in every instance, the contract be provided to the consumer in the language or one of the languages of that Member State, provided it is an official language of the Community;

b) in the case of a timeshare contract concerning one specific immovable property, the trader provides the consumer with a certified translation of the contract in the language or one of the languages of the Member State in which the property is situated, provided it is an official language of the Community.”

The MS where the trader carries out sales activities may also require the contract to be provided to the consumer in the language or one of the languages of that Member State, provided it is an official language of the Community.

NATURE OF THE INFORMATION: The information in Annexes I to IV form an integral part of the contract and should be included in the contract. Also this information must not be altered unless the parties expressly agree otherwise or the changes result from unusual and unforeseeable circumstances beyond the trader’s control, the consequences of which could not have been avoided even if all due care had been exercised. These changes must be communicated to the consumer on paper or on another durable medium easily accessible to him, before the contract is concluded and the contract must expressly mention such changes.

In addition to the information in Annexes I to IV, the contract shall include also the identity, place of residence and signature of each of the parties and the date and place of the conclusion of the contract.

INFORMATION ON THE RIGHT OF WITHDRAWAL: In relation to the notice of withdrawal, this must be signed separately by the consumer. The contract must include a separate standard withdrawal form, as set out in Annex V, intended to facilitate the exercise of the right of withdrawal in accordance with Article 6.

COPY OF THE CONTRACT: Finally, the consumer must receive a copy or copies of the contract at the time of its conclusion.

2.3.   WITHDRAWAL

Article 6 provides for the right of withdrawal. This article states that MSs must ensure that the consumer is given a period of 14 calendar days to withdraw from the timeshare, long-term holiday product, resale or exchange contract, without giving any reason. That time limit is calculated from the day of the conclusion of the contract or of any binding preliminary contract or from the day when the consumer receives the contract or any binding preliminary contract if it is later than the date of signature.

EXTENSION OF THE WITHDRAWAL PERIOD: If the consumer is not provided with a separate withdrawal form completed by the trader in writing on paper or other durable medium, then the withdrawal period expires after one year and 14 calendar days from the signing or receipt of the contract/pre-contract as the case may be.

In case the standard withdrawal form is provided but the information of Annexes I to IV is not provided in writing on paper or on another durable medium, then the period expires after 3 months and 14 calendar days from the signature or receipt of the contract/pre-contract, as the case may be.

Furthermore, the same article states that MSs must provide for appropriate penalties in accordance with article 15, in particular in the event that, on expiry of the withdrawal period, the trader has failed to comply with the information requirements set out in the Directive.

In the cases where the trader remedies the breach by providing the consumer with the information (either Annexes I to IV or the standard withdrawal form) then the 14-day withdrawal period starts from the day on which the consumer receives the form or information.

In relation to exchange contracts offered jointly and simultaneously with the timeshare contract to the consumer, then the withdrawal period is calculated as above and as applicable to the timeshare contract.

EXERCISE OF THE RIGHT: Under article 7, when the consumer notifies his intention to withdraw within the withdrawal period, either on the standard form or on paper or on another durable medium, he is deemed to have validly withdrawn from the contract.

EFFECT OF THE EXERCISE OF THE RIGHT: According to article 8, upon exercise of the right of withdrawal, the obligations of both parties cease to apply. The consumer is not liable for any expenses and is not liable for amounts corresponding to the services provided before the withdrawal.

ADVERTISEMENT: Article 9(1) expressly prohibits traders in timeshare, long-term holiday products and exchange contracts from charging any advance payment, provision of guarantees, reservation of money on accounts, explicit acknowledgement of debts or any other consideration to the trader or to any third party by the consumer before the end of the withdrawal period.

TERMINATION OF ANCILLARY CONTRACTS:  Based on Article 11, where the consumer exercises the right to withdraw from the timeshare or long-term holiday product contract, any exchange contract ancillary to it or any other ancillary contract is automatically terminated, at no cost to the consumer.

An “ancillary contract” is defined in the Directive as «a contract under which the consumer acquires services which are related to a timeshare contract or long-term holiday product contract and which are provided by the trader or a third party on the basis of an arrangement between that third party and the trader» .

Also, where the price is fully or partly covered by a credit granted to the consumer by the trader, or by a third party on the basis of an arrangement between the third party and the trade contract agreement, this is terminated, at no cost to the consumer, where the consumer exercises the right to withdraw from the timeshare, long-term holiday product, resale or exchange contract.

Of course, for the termination of ancillary contracts, the MSs are required to lay down more detailed rules.

2.4.   OTHER RELATED OBLIGATIONS/RIGHTS

SPECIAL PROVISIONS RELATING TO RESALE CONTRACTS: In relation to resale contracts, article 9(2) states that MSs must ensure that any advance payment, provision of guarantees, reservation of money on accounts, explicit acknowledgement of debt or any other consideration to the trader or to any third party by the consumer before the actual sale takes place or the resale contract is otherwise terminated, is prohibited.

SPECIFIC PROVISIONS RELATING TO LONG-TERM HOLIDAY PRODUCT CONTRACTS: Article 10 states that in cases of long-term holiday product contracts, payment must be made according to a staggered payment schedule.

Any payment of the price specified in the contract otherwise than in accordance with the staggered payment schedule is prohibited. The payments, including any membership fee, must be divided into yearly instalments, each of which must be of equal value. Also, the trader must send a written request for payment, on paper or on another durable medium, at least fourteen calendar days in advance of each due date.

Finally, on the basis of article 10(2) from the date of payment of the 2nd instalment, the consumer may terminate the contract without incurring any penalty, by giving notice to the trader within fourteen calendar days of receiving the request for payment of each instalment. This right does not affect rights to terminate the contract under existing national legislation – i.e., the consumer’s rights in relation to other infringements are not affected.

3. OBLIGATIONS OF MEMBER STATES

JUDICIAL AND ADMNISTRATIVE REDRESS: Article 13 states that MSs have an obligation to maintain that adequate and effective means exist to ensure compliance by traders with the Directive. The instruments include a right for various actors to have recourse to the courts or competent administrative bodies to ensure the application of national provisions. These bodies consist of public bodies and authorities or their representatives, consumer organisations with a legitimate interest in protecting consumers as well as professional organisations with a legitimate interest in taking such action.

The MSs also have to inform consumers about transposing the Directive and must encourage, where appropriate, traders and code owners to inform consumers of their codes of conduct. Code owner means “any entity, including a trader or group of traders, which is responsible for the formulation and revision of a code of conduct and/or for monitoring compliance with the code by those who have undertaken to be bound by it.”. Code of conduct means “an agreement or set of rules not imposed by law, regulation or administrative provision of a Member State which defines the behaviour of traders who undertake to be bound by the code in relation to one or more particular commercial practices or business sectors”.

Also, MSs encourage the setting up or development of adequate and effective out-of-court complaints and redress procedures for the settlement of consumer disputes under this Directive and must, where appropriate, encourage traders and their branch organisations to inform consumers of the availability of such procedures .

PENALTIES: Article 15 states that MSs must provide for penalties in the event of a trader’s failure to comply with the national provisions.  The penalties must be effective, proportionate and dissuasive.

REPEAL: With the adoption of the Directive, Directive 94/47/EC has been repealed.

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Distance marketing of Financial Services to Consumers (Directive 2002/65/EC)

1. PURPOSE OF THE DIRECTIVE

Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC (the “Directive”) aims at approximating the laws, regulations and administrative provisions of the Member States concerning the distance marketing of consumer financial services.

Distance contract is any contract concerning financial services concluded between a supplier and a consumer under an organised distance sales or service-provision scheme run by the supplier, who, for the purpose of that contract, makes exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.

LEVEL OF HARMONIZATION: The Directive is a maximum harmonisation Directive as explained in paragraph 13 of the preamble. It is important however to note that in relation to the information requirements which should be given to the consumer, the MS in accordance with article 4(2) may maintain or introduce more stringent provisions on prior information requirements when the provisions are in conformity with Community law.

IMPERATIVE NATURE OF THE PROVISIONS OF THE DIRECTIVE: In accordance with article 12 of the Directive, Consumers may not waive the rights conferred on them by this Directive. Also MSs must take the measures needed to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-member country as the law applicable to the contract, if this contract has a close link with the territory of one or more Member States.

SCOPE OF THE DIRECTIVE: In accordance with article 1 of the Directive, this applies to distance marketing of consumer financial services. In the case of contracts for financial services comprising an initial service agreement followed by successive operations or a series of separate operations of the same nature performed over time, the provisions of this Directive apply only to the initial agreement. In case there is no initial service agreement but the successive operations or the separate operations of the same nature performed over time are performed between the same contractual parties, then articles 3 and 4 apply only in relation to the first operation. Where, however, no operation of the same nature is performed for more than one year, the next operation will be deemed to be the first in a new series of operations and, accordingly, articles 3 and 4 shall apply.

2. SUBSTANTIVE PROVISIONS

2.1.              INFORMATION PRIOR TO THE CONCLUSION OF THE DISTANCE CONTRACT

In accordance with article 3, a Consumer, in good time before he is bound by any distance contract or offer, must be provided with information concerning the supplier, the financial service, the distance contract and the redress procedures (i.e. information relating to whether or not there is an out-of-court complaint and redress mechanism for the consumer that is party to the distance contract and, if so, the methods for having access to it etc). For example, in relation to the financial service, the consumer must be informed in relation to the description of the main characteristics of the financial service, the total price to be paid by the consumer to the supplier for the financial service including all related fees, charges and expenses, and all taxes paid via the supplier or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it. Where relevant notice indicating that the financial service is related to instruments involving special risks related to their specific features or the operations to be executed or whose price depends on fluctuations in the financial markets outside the supplier’s control and that historical performances are no indicators for future performances, notice of the possibility that other taxes and/or costs may exist that are not paid via the supplier or imposed by him, any limitations of the period for which the information provided is valid, the arrangements for payment and for performance and any specific additional cost for the consumer of using the means of distance communication, if such additional cost is charged.

In accordance with article 3(2), the above information must be provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the principles governing the protection of those who are unable, pursuant to the legislation of the MSs, to give their consent, such as minors.

INFORMATION IN CASE OF VOICE TELEPHONY COMMUNICATIONS: In accordance with article 9(3), in cases of voice telephony communications information such as the identity of the  supplier and the commercial purpose of the call initiated by the supplier shall be made explicitly clear at the beginning of any conversation with the consumer as well as the identity of the person in contact with the consumer and his link with the supplier and a description of the main characteristics of the financial service. The existence or absence of a right of withdrawal in accordance with Article 6 and, where the right of withdrawal exists, its duration and the conditions for exercising it, including information on the amount which the consumer may be required to pay on the basis of Article 7(1). The supplier shall inform the consumer that other information is available on request and of what nature this information is. In any case the supplier shall provide the full information when he fulfils his obligations under Article 5.

Information on contractual obligations, to be communicated to the consumer during the pre-contractual phase, shall be in conformity with the contractual obligations which would result from the law presumed to be applicable to the distance contract if the latter were concluded.

2.2.    INFORMATION/RIGHTS CONNECTED WITH THE CONTRACT FORMATION

WITHDRAWAL: Articles 6 and 7 refer to the right of consumers to withdraw from a contract. In accordance with Article 6, the consumer has at his disposal 14 days to withdraw from the contract without any penalty and without having to provide reasons for such withdrawal. The period of 14 days is extended to 30 calendar days in the case of distance contracts relating to life insurance covered by Directive 90/619/EEC and personal pension operations. The period for withdrawal begins to run from the day of the conclusion of the distance contract (and in relation to life assurance, from the time when the consumer is informed that the distance contract has been concluded) or from the day on which the consumer receives the contractual terms and conditions and the information in accordance with Article 5, whichever took place last.

Member States, in addition to the right of withdrawal, may provide that the enforceability of contracts relating to investment services is suspended for the period during which the right of withdrawal is effective.

In accordance with article 6(2), the right of withdrawal does not apply in the following cases:

“(a) financial services whose price depends on fluctuations in the financial market outside the suppliers control, which may occur during the withdrawal period, such as services related to:

– foreign exchange,

– money market instruments,

– transferable securities,

– units in collective investment undertakings,

– financial-futures contracts, including equivalent cash-settled instruments,

– forward interest-rate agreements (FRAs),

– interest-rate, currency and equity swaps,

– options to acquire or dispose of any instruments referred to in this point including equivalent cash-settled instruments. This category includes in particular options on currency and on interest rates;

(b) travel and baggage insurance policies or similar short-term insurance policies of less than one month’s duration;

(c) contracts whose performance has been fully completed by both parties at the consumer’s express request before the consumer exercises his right of withdrawal.”

Also, article 6(3), states that MSs may provide that the right of withdrawal has no application in the following instances:

“(a) any credit intended primarily for the purpose of acquiring or retaining property rights in land or in an existing or projected building, or for the purpose of renovating or improving a building, or

(b) any credit secured either by mortgage on immovable property or by a right related to immovable property, or

(c) declarations by consumers using the services of an official, provided that the official confirms that the consumer is guaranteed the rights under Article 5(1).

This paragraph shall be without prejudice to the right to a reflection time to the benefit of the consumers that are resident in those Member States where it exists, at the time of the adoption of this Directive.”

Article 6(6) states that the deadline for sending a withdrawal notice by the consumer shall be deemed to have been observed if it is dispatched before the deadline expires.

It is important to note that if to a distance contract of a given financial service another distance contract has been attached concerning services provided by the supplier or by a third party on the basis of an agreement between the third party and the supplier, this additional distance contract shall be cancelled automatically, without any penalty, if the consumer exercises his right of withdrawal.

In the case of payment of the service provided before withdrawal, Article 7 applies. The said Article states that when the consumer exercises his right of withdrawal he may only be required to pay, without any undue delay, for the service actually provided by the supplier in accordance with the contract. The amount payable shall not exceed an amount which is in proportion to the extent of the service already provided in comparison with the full coverage of the contract.  In no case may such amount be construed as a penalty. Furthermore, the supplier may not require the consumer to pay any amount unless he can prove that the consumer was duly informed about the amount payable within the withdrawal period. However, the supplier may not require such payment if he has commenced the performance of the contract before the expiry of the withdrawal period without the consumer’s prior request.

In accordance with Article 7(4), the supplier shall, without any undue delay and no later than within 30 calendar days, return to the consumer any sums he has received from him in accordance with the distance contract, (except for amounts paid during the withdrawal period). Under Article 7(5), the consumer shall return to the supplier within 30 calendar days from the day that the consumer dispatches the notification of withdrawal, any sums and/or property he has received from the supplier.

PAYMENT BY CARD: By Article 8, the consumer may request the cancellation of a payment where fraudulent use has been made of his payment card in connection with distance contracts and in the event of such fraudulent use, to be re-credited with the sum paid or have them returned.

UNSOLICITED SERVICES: Except in the cases of implicit renewal of the distance contract, MSs must prohibit the supply of financial services to a consumer without a prior request on his part, when this supply includes a request for immediate or deferred payment. Also, a consumer is exempt from any obligation in the event of unsolicited supplies and the absence of a reply not constituting consent.

UNSOLICITED COMMUNICATIONS: Article 10 states that the use by a supplier of automated calling systems without human intervention (automatic calling machines) or fax machines, shall require the consumer’s prior consent. In the same way, if individual communications are allowed with the consumer through another means of distance communication, a prior consent of the consumers concerned must be obtained or they may be used only if the consumer has not expressed his manifest objection.

UNFAIR CONTRACT TERMS: In accordance with Article 15, any contractual term or condition providing that “the burden of proof of the respect by the supplier of all or part of the obligations incumbent on him pursuant to this Directive should lie with the consumer” shall be an unfair term.

3. OBLIGATIONS/RIGHTS OF MEMBER STATES

SANCTIONS:  Article 11 of the Directive, provides that MSs shall provide for appropriate sanctions in the event of the supplier’s failure to comply with national provisions adopted pursuant to this Directive. Also, MSs may, in case of breach of the above provisions, allow the consumer to cancel the contract at any time, free of charge and without penalty. These sanctions must be effective, proportional and dissuasive.

JUDICIAL AND ADMINISTRATIVE REDRESS: In accordance with Article 13, MSs ensure that adequate and effective means exist to ensure compliance with this Directive in the interests of consumers. The means include provisions whereby one or more bodies, as determined by national law, may take action in accordance with national law before the courts or competent administrative bodies to ensure that the national provisions for the implementation of the Directive. Such Bodies are public bodies or their representatives; consumer organisations having a legitimate interest in protecting consumers and professional organisations having a legitimate interest in acting.

It is important to note that in accordance with Article 13(3), MSs shall take the measures necessary to ensure that operators and suppliers of means of distance communication put an end to practices that have been declared to be contrary to this Directive, on the basis of a judicial decision, an administrative decision or a decision issued by a supervisory authority notified to them, where those operators or suppliers are in a position to do so.

OUT-OF-COURT REDRESS: Article 14 provides for the promotion of the setting up or development of adequate and effective out-of-court complaints and redress procedures for the settlement of consumer disputes concerning financial services provided at distance. They should also encourage the bodies responsible for out-of-court settlement of disputes to cooperate in the resolution of cross-border disputes concerning financial services provided at distance.

4. OTHER PROVISIONS

The Directive also provides for specific amendments. Based on articles 17, 18 and 19, Directive 90/619/EEC, Directive 97/7/EC and Directive 98/27/EC are amended respectively.

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Credit agreements for consumers relating to residential immovable property 

 (Directive 2014/17/EU)

1. PURPOSE OF THE DIRECTIVE

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 amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010  (“the Directive”) aims, in accordance with article 1, to establish a common framework for certain aspects of the laws, regulations and administrative provisions of the Member States (“MS”) concerning agreements covering credit for consumers secured by a mortgage or otherwise relating to residential immovable property, including an obligation to carry out a creditworthiness assessment before granting a credit, as a basis for the development of effective underwriting standards in relation to residential immovable property in the MSs, and for certain prudential and supervisory requirements, including for the establishment and supervision of credit intermediaries, appointed representatives and non-credit institutions.

LEVEL OF HARMONIZATION: Based on article 2, the Directive is of minimum harmonization and does not prevent MSs from maintaining or adopting stricter provisions in order to protect consumers, provided that these provisions are consistent with their obligations under Union Law. However, MSs may not maintain or introduce provisions derogating from those in article 14(2) and Annex II Part A (to the extent that these relate to standardized pre-contractual information through the European Standard Information Sheet (ESIS)) and of article 17(1) – (5), (7) and (8) and of Annex I to the extent that they concern the common and consistent EU standard for the calculation of the APR.

IMPERATIVE NATURE OF THE DIRECTIVE: According to article 41, MSs ensure that consumers may not waive the rights conferred on them by national law transposing the Directive. Also, it is not possible to circumvent the Directive simply because the contracts are worded in a specific way so as to avoid the application of the Directive to them.

SCOPE OF APPLICATION: Based on article 3, the Directive applies to two types of contracts:

“(a) credit agreements which are secured either by a mortgage or by another comparable security commonly used in a Member State on residential immovable property or secured by a right related to residential immovable property; and

(b) credit agreements the purpose of which is to acquire or retain property rights in land or in an existing or projected building.”

Based on the above article, the Directive does not apply in the following cases:

“(a)     Equity release credit agreements where the creditor:

(i)         contributes a lump sum, periodic payments or other forms of credit disbursement in return for a sum deriving from the future sale of a residential immovable property or a right relating to residential immovable property; and

(ii)        will not seek repayment of the credit until the occurrence of one or more specified life events of the consumer, as defined by MSs, unless the consumer breaches his contractual obligations which allows the creditor to terminate the credit agreement;

(b)        credit agreements where the credit is granted by an employer to his employees as a secondary activity where such a credit agreement is offered free of interest or at an APRC lower than those prevailing on the market and not offered to the public generally;

(c)        credit agreements where the credit is granted free of interest and without any other charges except those that recover costs directly related to the securing of the credit;

(d)        credit agreements in the form of an overdraft facility and where the credit has to be repaid within one month;

(e)        credit agreements which are the outcome of a settlement reached in court or before another statutory authority;

(f)         credit agreements which relate to the deferred payment, free of charge, of an existing debt and which do not fall within the scope of point (a) of paragraph 1.”

 MSs also have the right not to apply specific articles of the Directive, or the Directive itself to certain contracts. These are analyzed in article 3(3) to 3(5) of the Directive.

2. SUBSTANTIAL PROVISIONS

2.1.      GENERAL OBLIGATIONS FOR CREDITORS, CREDIT INTERMEDIARIES AND APPOINTED REPRESENTATIVES

Based on article 7, MSs must require that when manufacturing credit products or granting, intermediating or providing advisory services on credit and, where appropriate, ancillary services to consumers or when executing a credit agreement, the creditor, credit intermediary or appointed representative acts honestly, fairly, transparently and professionally, taking account of the rights and interests of the consumers. Based on article 8, it is obliged to provide information to the consumer free of charge regarding compliance with the Directive. Finally, based on article 9, their staff must have an appropriate level of knowledge and activity to undertake, offer or grant credit agreements, carry out credit intermediation activities (i.e. credit brokerage) or provide consulting services.

2.2.    INFORMATION/OBLIGATIONS BEFORE THE CONTRACT IS CONCLUDED

ADVERTISEMENTS: Article 10 states that without prejudice to Directive 2005/29/EC, MSs shall require that any advertising and marketing communications concerning credit agreements are fair, clear and not misleading. In particular, article 10 prohibits wording that may create false expectations for a consumer regarding the availability or the cost of a credit.

By virtue of article 11, where an advertisement mentions an interest rate or figures relating to the cost of credit, it should include standardized information. The information is listed in article 11(2) and is the following:

“(a)     the identity of the creditor or, where applicable, the credit intermediary or appointed representative;

(b)        where applicable, that the credit agreement will be secured by a mortgage or another comparable security commonly used in a Member State on residential immovable property or by a right related to residential immovable property;

(c)        the borrowing rate, indicating whether this is fixed or variable or a combination of both, together with particulars of any charges included in the total cost of the credit to the consumer;

(d)        the total amount of credit;

(e)        the APRC which shall be included in the advertisement at least as prominently as any interest rate;

(f)         where applicable, the duration of the credit agreement;

(g)        where applicable, the amount of the instalments;

(h)        where applicable, the total amount payable by the consumer;

(i)         where applicable, the number of instalments;

(j)         where applicable, a warning regarding the fact that possible fluctuations of the exchange rate could affect the amount payable by the consumer.”

The above information (apart from that of article 11(2)(a), (b) and (j)) is disclosed by representative example. Where the granting of credit requires the conclusion of a contract relating to the additional service, and in particular the cost of that service, cannot be determined in advance, the obligation to conclude such a contract must be clearly, concisely and prominently stated, together with the APRC.

The above information must be legible or clearly audible, depending on the medium used for the advertisement.

TYING AND BUNDLING PRACTICES: Based on the interpretative provision, a bundling practice is the offering or the selling of a credit agreement in a package with other distinct financial products or services where the credit agreement is also made available to the consumer separately but not necessarily on the same terms or conditions as when offered bundled with the ancillary services. A tying practice is the offering or the selling of a credit agreement in a package with other distinct financial products or services where the credit agreement is not made available to the consumer separately. Under article 12, tying practices are prohibited except where the creditor can demonstrate that the tying products result in a clear advantage for consumers, taking due account of the availability and prices of the relevant products offered on the market.

Irrespective of the above, where the MSs allow it, creditors have the possibility to request from the consumer or a member of his family or a close relative to:

“(a)     open or maintain a payment or a savings account, where the only purpose of such an account is to accumulate capital to repay the credit, to service the credit, to pool resources to obtain the credit, or to provide additional security for the creditor in the event of default;

(b)        purchase or keep an investment product or a private pension product, where such product which primarily offers the investor an income in retirement serves also to provide additional security for the creditor in the event of default or to accumulate capital to repay the credit, to service the credit or to pool resources to obtain the credit;

(c)        conclude a separate credit agreement in conjunction with a shared-equity credit agreement to obtain the credit.”

Finally, MSs may allow creditors to require the consumer to hold a relevant insurance policy related to the credit agreement. In such cases, they must ensure that the creditor accepts the insurance policy from a supplier different to his preferred supplier where such policy has a level of guarantee equivalent to the one the creditor has proposed.

GENERAL INFORMATION: Based on article 13, creditors, tied credit intermediaries or their appointed representatives shall ensure that general information on credit agreements are provided. Such information shall be made available in a clear and comprehensible manner in writing, or on another durable medium or in electronic form. Some of the information is the identity, geographical address of the institution, the purposes for which the credit will be used, the possible duration of the credit agreements, a representative example of the total amount of the credit, a description of the terms directly related to early repayment, a general warning about with the possible consequences of breach of contract etc.

PRE-CONTRACTUAL INFORMATION: Based on article 14, the consumer should also be provided with personalized information necessary to compare credits available on the market, assess their impact and make an informed decision about entering into a credit agreement without undue delay and before the consumer is bound by any credit agreement or offer. This information is provided in writing or on another durable medium with the European Standardized Information Sheet (‘ESIS’). ESIS is included in Annex II.

Any offer binding on the creditor, must be provided in writing or on another durable medium and must be accompanied by the ESIS when no ESIS was previously provided to the consumer or where the characteristics of the offer are different from the information contained in the ESIS previously provided. Of course, MSs can require that the ESIS is provided before providing a binding offer.

In accordance with article 14(6) the time period during which the offer is binding for the creditor is at least 7 days. This period is called the study period during which the consumer may accept the contract, but the creditor may not withdraw its offer. The 7 days may also be a withdrawal period. That is to say, the MSs may elect that 7 days is the period during which the consumer can withdraw after accepting the contract.

Also MSs must specify a time period of at least seven days during which the consumer will have sufficient time to compare offers, assess their implications and make an informed decision.

Finally, based on article 14(11) MSs ensure that at least where no right of withdrawal exists the creditor or, where applicable, the credit intermediary or appointed representative provides the consumer with a copy of the draft credit agreement, at the time of the provision of an offer binding on the creditor. Where a right of withdrawal exists, MSs shall ensure that the creditor or, where applicable, the credit intermediary or appointed representative offers to provide the consumer with a copy of the draft credit agreement at the time of the provision of an offer binding on the creditor.

ADDITIONAL PROVISION OF INFORMATION BY CREDIT INTERMEDIARIES AND APPOINTED REPRESENTATIVES: In accordance with article 15, the credit intermediary or appointed representative must provide the consumer with at least additional information on paper or on another durable medium. Some of the information include the identity and the geographical address of the credit intermediary, the register in which he has been included, whether the credit intermediary offers advisory services, the fees etc.

Credit intermediaries who are not tied but who receive commission from one or more creditors must, at the consumer’s request, provide information on the variation in levels of commission payable by the different creditors providing the credit agreements being offered to the consumer. Where the credit intermediary charges a fee to the consumer and additionally receives commission from the creditor or a third party, the credit intermediary must explain to the consumer whether or not the commission will be offset against the fee, either in part or in full.

It is noted that the fees of the credit intermediary are included in the APRC calculation.

ADEQUATE EXPLANATIONS: Article 16 states that creditors, credit intermediaries or appointed representatives must provide adequate explanations to the consumer on the proposed credit agreements and any ancillary services, in order to place the consumer in a position enabling him to assess whether the proposed credit agreements and ancillary services are adapted to his needs and financial situation. Such explanations include the pre-contractual information, the essential characteristics of the products proposed, the specific effects the products proposed may have on the consumer, including the consequences of default in payment by the consumer, where ancillary services are bundled with a credit agreement, whether each component of the bundle can be terminated separately and the implications for the consumer of doing so.

ASSESSMENT OF CREDITWORTHINESS: Article 18 refers to the obligation of creditors to assess the creditworthiness of the consumer taking into account the factors that cause the verification of the prospect of the consumer to meet his obligations under the credit agreement. In the calculation of the creditworthiness, the fact that the value of the property intended for residence exceeds the amount of the credit should not be taken into account, except where the purpose of the credit agreement is the construction or renovation of the property intended for residence.

The creditor may not cancel or modify a credit agreement on the grounds that the assessment of the consumer’s creditworthiness was not carried out correctly, except where the consumer intentionally omitted or falsified information that he had to provide based on article 20.

The creditor should also inform the consumer that a database search is to be made and in case the credit application is rejected the consumer should be informed of the rejection and where applicable that it is based on automated data processing.

Finally, the creditor should only make the credit available to the consumer where the result of the creditworthiness assessment indicates that the obligations resulting from the credit agreement are likely to be met in the manner required under that agreement.

In relation to the assessment, this is carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which is necessary, sufficient and proportionate. The information must be obtained by the creditor from relevant internal or external sources, including the consumer, and including information provided to the credit intermediary or appointed representative during the credit application process. The information must be appropriately verified, including through reference to independently verifiable documentation when necessary.  The creditor is not allowed to terminate the credit agreement because incomplete information was provided unless the consumer concealed or falsified information.

The creditor, credit intermediaries or appointed representatives are also obliged to warn the consumer that if they are unable to perform a credit assessment because the consumer has chosen not to provide the information or verification required for the credit assessment, credit cannot be granted. This warning may be provided in a standardized form.

PROPERTY VALUATION: Under article 19, creditors should use specific standards when valuing property and must take appropriate measures to ensure that the standards are used when the valuation is carried out by a third party.

2.3.    APRC

The Annual Percentage Rate of Charge (“APRC”) is the total cost of credit to the consumer, expressed as an annual percentage of the total amount of credit, and equates, on an annual basis, to the present value of all future or existing commitments (drawdowns, repayments and charges) agreed by the creditor and the consumer.  The APRC must be calculated in accordance with the mathematical formula set out in Annex I. The rest of the article mentions the other principles for calculating the APRC. These are the following:

• The costs of opening and maintaining a specific account, of using a means of payment for both transactions and drawdowns on that account and of other costs relating to payment transactions must be included in the total cost of credit to the consumer whenever the opening or maintaining of an account is obligatory in order to obtain the credit or to obtain it on the terms and conditions marketed.
• The calculation of the APRC must be based on the assumption that the credit agreement is to remain valid for the period agreed and that the creditor and the consumer will fulfil their obligations under the terms in the credit agreement.
• Where there are clauses allowing variations in the borrowing rate which are unquantifiable at the time of the calculation, then the APRC is calculated on the assumption that the borrowing rate and other charges will remain fixed in relation to the level set at the conclusion of the contract.
• Where the credit agreement concerns a fixed borrowing rate in relation to the initial period of at least five years, at the end of which a negotiation on the borrowing rate takes place to agree on a new fixed rate, the calculation of the additional, illustrative APRC disclosed in the ESIS must cover only the initial fixed rate period, as at the end of the fixed borrowing rate period, the capital outstanding is repaid.
• Where the credit agreement allows for variations in the borrowing rate, the consumer is informed of the possible impacts of variations on the amounts payable and on the APRC at least by means of the ESIS. This is be done by providing the consumer with an additional APRC which illustrates the possible risks linked to a significant increase in the borrowing rate. Where the borrowing rate is not capped, this information shall be accompanied by a warning highlighting that the total cost of the credit to the consumer, shown by the APRC, may change. (This rule does not apply where the previous rule applies).
• Annex I contains other scenarios for how the APRC is calculated (e.g. If a credit agreement gives the consumer freedom of drawdown the total amount of credit shall be deemed to be drawn down immediately and in full.)

2.4.    OTHER OBLIGATIONS/ RIGHTS ASSOCIATED WITH THE CREDIT AGREEMENT

FOREIGN CURRENCY LOANS: Based on article 23, where the credit agreement is related to a foreign currency loan, then, at the time the contract is entered there is an obligation imposed on the creditor to provide for a right on the consumer to convert the credit agreement into an alternative currency provided that some conditions are satisfied or, alternatively that there are other arrangements which limit the foreign exchange risk to which the consumer is exposed under the credit agreement. Where the consumer has a right to convert the credit agreement into an alternative currency in accordance with paragraph 1(a), the MSs shall ensure that the exchange rate at which the conversion is carried out is the market exchange rate applicable on the day of application for conversion unless otherwise specified in the credit agreement.

Where a consumer has a foreign currency loan, the creditor must warn the consumer on a regular basis on paper or on another durable medium at least where the value of the total amount payable by the consumer which remains outstanding or of the regular instalments varies by more than 20% from what it would be if the exchange rate between the currency of the credit agreement and the currency of the Member State applicable at the time of the conclusion of the credit agreement were applied. The warning shall (a) inform the consumer of a rise in the total amount payable by the consumer, (b) set out where applicable the right to convert to an alternative currency and (c) the conditions for doing so and (d) explain any other applicable mechanism for limiting the exchange rate risk to which the consumer is exposed.

VARIABLE RATE CREDITS: Under article 24, where a credit agreement is a variable rate agreement, it must:

“a)       any indexes or reference rates used to calculate the borrowing rate are clear, accessible, objective and verifiable by the parties to the credit agreement and the competent authorities; and

 b) historical records of indexes for calculating the borrowing rates are maintained either by the providers of these indexes or the creditors.”

EARLY REPAYMENT: According to article 25 the consumer has a right to discharge fully or partially his obligations under a credit agreement prior to the expiry of that agreement. In such cases, the consumer shall be entitled to a reduction in the total cost of the credit to the consumer, such reduction consisting of the interest and the costs for the remaining duration of the contract. This is not an absolute rule since the MSs may provide for time limits on the exercise of the right as well as for the right of the creditor to claim compensation for its loss.

Where a consumer seeks to discharge his obligations under a credit agreement prior to the expiry of the agreement, the creditor must provide the consumer without delay after receipt of the request, on paper or on another durable medium, with the information necessary to consider that option. That information shall at least quantify the implications for the consumer of discharging his obligations prior to the expiry of the credit agreement and clearly set out any assumptions used. Any assumptions used shall be reasonable and justifiable.

FLEXIBLE AND RELIABLE: A right granted to creditors can be found in article 26. Under this article, MSs ensure that the claim against the security is enforceable by or on behalf of creditors.

INFORMATION CORNCERNING CHANGES IN THE BORROWING RATE: In accordance with article 27, the creditor must inform the consumer of any change in the borrowing rate in writing or on another durable medium before the new rate comes into force. This shall include at least the following information: the amount of the payments to be made after the new borrowing rate takes effect and, in cases where the number or frequency of the payments changes, particulars thereof.

ARREARS AND FORECLOSURE: According to article 28, creditors must provide for a reasonable grace period before initiating foreclosure proceedings.

2.5.    ADVISORY SERVICES

According to article 22 the creditor, credit intermediary or appointed representative explicitly inform the consumer, in the context of a given transaction, whether advisory services are being or can be provided to the consumer. An advisory service is the provision of personal recommendations to a consumer in respect of one or more transactions relating to credit agreements and constitutes a separate activity from the granting of a credit and from the credit intermediation activities.

INFORMATION PRIOR TO THE PROVISION OF ADVISORY SERVICES: Before the provision of advisory services or, where applicable, the conclusion of a contract for the provision of advisory services, the creditor, credit intermediary or appointed representative must provide the consumer information whether the recommendation will be based on considering only their own product range, or a wide range of products from across the market so that the consumer can understand the basis on which the recommendation is made as well as the fee payable by the consumer for the advisory services or, where the amount cannot be ascertained at the time of disclosure, the method used for its calculation. This information must be provided in writing or on another durable medium.

Article 22(3) provides additional principles to be followed in the case of consultancy services. These are the competence and knowledge of staff, the obligations of professional conduct in the provision of credit and the following requirements:

“a)       creditors, credit intermediaries or appointed representatives obtain the necessary information regarding the consumer’s personal and financial situation, his preferences and objectives so as to enable the recommendation of suitable credit agreements. Such an assessment shall be based on information that is up to date at that moment in time and shall take into account reasonable assumptions as to risks to the consumer’s situation over the term of the proposed credit agreement;

b) creditors, tied credit intermediaries or appointed representatives of tied credit intermediaries consider a sufficiently large number of credit agreements in their product range and recommend a suitable credit agreements or several suitable credit agreements from among their product range for the consumer’s needs, financial situation and personal circumstances;

c) non-tied credit intermediaries or appointed representatives of non-tied credit intermediaries consider a sufficiently large number of credit agreements available on the market and recommend a suitable credit agreement or several suitable credit agreements available on the market for the consumer’s needs, financial situation and personal circumstances;

d) creditors, credit intermediaries or appointed representatives act in the best interests of the consumer by:

i) informing themselves about the consumer’s needs and circumstances; and

ii) recommending suitable credit agreements in accordance with points (a), (b) and (c); and

e) creditors, credit intermediaries or appointed representatives give the consumer a record on paper or on another durable medium of the recommendation provided”

3. OBLIGATIONS/OPTIONS OF MSs

COMPETENT AUTHORITIES: Based on article 5 of the Directive, MSs must designate the national competent authorities empowered to ensure the application and enforcement of this Directive and must ensure that they are granted investigating and enforcement powers and adequate resources necessary for the efficient and effective performance of their duties. The authorities referred to in the first subparagraph shall be either public authorities or bodies recognised by national law or by public authorities expressly empowered for that purpose by national law. Creditors, credit intermediaries or appointed representatives are excluded from acting as competent authorities.

FINANCIAL EDUCATION: Based on article 6, MSs must promote measures that support the education of consumers in relation to responsible borrowing and debt management.

CONDITIONS APPLICABLE TO CREDITORS, CREDIT INTERMEDIARIES AND APPOINTED REPRESENTATIVES:  In accordance with article 7 of the Directive, the MSs require that when manufacturing credit products or granting, intermediating or providing advisory services on credit and, where appropriate, ancillary services to consumers or when executing a credit agreement, the creditor, credit intermediary or appointed representative acts honestly, fairly, transparently and professionally, taking account of the rights and interests of the consumers and also ensure that the manner in which creditors remunerate their staff and credit intermediaries and the manner in which credit intermediaries remunerate their staff and appointed representatives do not impede compliance with the obligation. Also, MSs must ensure that where creditors, credit intermediaries or appointed representatives provide advisory services the remuneration structure of the staff involved does not prejudice their ability to act in the consumer’s best interest and in particular is not contingent on sales targets. In order to achieve that goal, MSs may in addition ban commissions paid by the creditor to the credit intermediary. Finally, they may prohibit or impose restrictions on payments from a consumer to a creditor or credit intermediary prior to the conclusion of a credit agreement.

PROVISION OF INFORMATION FREE OF CHARGE: As already mentioned and based on article 8, MSs must ensure that, when information is provided to consumers in compliance with the requirements set out in this Directive, such information is provided without charge to the consumer.

KNOWLEDGE AND COMPETENCE REQUIREMENTS FOR EMPLOYEES: In accordance with article 9, MSs must ensure that creditors, credit intermediaries and appointed representatives require their staff to possess and to keep up-to-date an appropriate level of knowledge and competence in relation to the manufacturing, the offering or granting of credit agreements, the carrying out of credit intermediation activities or the provision of advisory services. In case that the conclusion of a credit agreement includes an ancillary service, appropriate knowledge and competence in relation to that ancillary service is required. This article also refers to the obligations of MSs in cases where a credit institution/credit intermediary provides services in the territory of one or more MSs.

MSs also have the obligation to require that all information obligations and practices of creditors, credit intermediaries and appointed representatives are fulfilled.

ASSESSMENT OF CREDITWORTHINESS: With regard to the assessment of the consumer’s creditworthiness, MSs must ensure that credit intermediaries or appointed representatives accurately submit the necessary information obtained from the consumer to the relevant creditor to enable the creditworthiness assessment to be carried out. They must also ensure that creditors specify in a clear and straightforward way at the pre-contractual phase the necessary information and independently verifiable evidence that the consumer needs to provide and the timeframe` within which the consumer needs to provide the information.

PROPERTY VALUATION: In relation to the valuation of real estate, the MSs must ensure that reliable standards are established. Also, national authorities are responsible for regulating independent appraisers who carry out property valuations and they must ensure that they comply with the national rules in place.

MSs must ensure that internal and external appraisers conducting property valuations are professionally competent and sufficiently independent from the credit underwriting process so that they can provide an impartial and objective valuation.

DATABASE ACCESS: Based on article 21, each MS must ensure access for all creditors from all MSs to databases used in that Member State for assessing the creditworthiness of consumers and for the sole purpose of monitoring consumers’ compliance with the credit obligations over the life of the credit agreement.

ADVISORY SERVICES: The MSs must establish the standards of the advisory services referred to above. Under article 21(4), MSs may prohibit the use of the terms “advice” and “adviser” or similar terms but if they do not prohibit them they must impose the following conditions on the use of the terms “independent advice” or “independent adviser”:

“a)       creditors, credit intermediaries or appointed representatives shall consider a sufficiently large number of credit agreements available on the market; and

b) creditors, credit intermediaries or appointed representatives shall not be remunerated for those advisory services by one or more creditors.”

Also, MSs may provide for an obligation for creditors, credit intermediaries and appointed representatives to warn a consumer when, considering the consumer’s financial situation, a credit agreement may induce a specific risk for the consumer. Furthermore, MSs must ensure that advisory services are only provided by creditors, credit intermediaries or appointed representatives. (With some exceptions)

FLEXIBLE AND RELIABLE MARKETS: Article 26 states that MSs must have appropriate mechanisms in place to ensure that the claim against the security is enforceable by or on behalf of creditors. MSs must ensure that creditors keep appropriate records concerning the types of immovable property accepted as a security as well as the related mortgage underwriting policies used. Also, they must take the necessary measures to ensure appropriate statistical monitoring of the residential property market.

ARREARS AND FORECLOSURE: With regard to default interest and foreclosure and in accordance with article 28(2), MSs may require that, where the creditor is permitted to define and impose charges on the consumer arising from the default, those charges are no greater than is necessary to compensate the creditor for costs it has incurred as a result of the default.

Based on article 28(3) MSs may allow creditors to impose additional charges on the consumer in the event of default. In that case MSs must place a cap on those charges.  Furthermore, MSs must not prevent the parties to a credit agreement from expressly agreeing that return or transfer to the creditor of the security or proceeds from the sale of the security is sufficient to repay the credit.

Finally, where the price obtained for the immovable property affects the amount owed by the consumer, MSs must have procedures or measures to enable the best efforts price for the foreclosed immovable property to be obtained. Where after foreclosure proceedings outstanding debt remains, MSs must ensure that measures to facilitate repayment in order to protect consumers are put in place.

SANCTIONS: Article 38 refers to the sanctions which MSs may impose. Specifically, MSs must lay down the rules on sanctions applicable to infringements of the national provisions adopted on the basis of the Directive and must take all measures necessary to ensure that they are implemented. Those sanctions must be effective, proportionate and dissuasive. In this regard, it is important to mention article 38(2). According to this:

«MSs shall provide that the competent authority may disclose to the public any administrative sanction that will be imposed for infringement of the measures adopted in the transposition of this Directive, unless such disclosure would seriously jeopardise the financial markets or cause disproportionate damage to the parties involved.»

4. OTHER RELEVANT PROVISIONS

REQUIREMENTS FOR ESTABLISHMENT AND SUPERVISION OF CREDIT INTERMEDIARIES AND APPOINTED REPRESENTATIVES: Article 29 refers to the obligations of credit intermediaries to obtain a licence to carry out their activities and the related obligations of MSs to license them. Article 30 refers to the obligations of credit intermediaries affiliated to a single credit institution.  Article 31 refers to the right of MSs to allow credit intermediaries to appoint appointed representatives.

Article 32 refers to the freedom of establishment and provision of services of credit intermediaries in other MSs  and Articles 33 and 34 refer to the manner of withdrawal of the authorisation of credit intermediaries and the supervision of credit intermediaries and appointed representatives.

LICENSING AND SUPERVISION OF NON-CREDIT INSTITUTIONS: Under Article 35, MSs must ensure that non-credit institutions are subject to an appropriate admission process including registration and supervision by a competent authority.

COOPERATION BETWEEN COMPETENT AUTHORITIES OF DIFFERENT MSS: Articles 36 and 37 refer to cooperation between competent authorities in different MS and the resolution of disputes between such authorities.

AMENDMENTS OF OTHER DIRECTIVES AND REGULATIONS: It is noted that articles 46 to 48 of the Directive amend Directives 2008/48/EC, 2013/36/EU and Regulation (EU) No 1093/2010.

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Credit agreements for consumers (Directive 2008/48/ EC)

1. PURPOSE OF THE DIRECTIVE

Directive 2008/48/ΕΚ of the European Parliament and of the Council of 23rd April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC («The Directive») aims at  harmonising certain aspects of the laws, regulations and administrative provisions of the Member States concerning agreements covering credit for consumers. A credit agreement is an agreement whereby a creditor grants or promises to grant to a consumer credit in the form of a deferred payment, loan or other similar financial accommodation.

HARMONISATION LEVEL: According to article 22, the Directive is a maximum harmonisation directive. However, based on paragraph 10 of the preamble of the Directive, Member States (“MSs”) may apply provisions of this Directive to areas not covered by its scope. Therefore, based on case C-602/10, a national measure is permissible irrespective whether it includes in its substantive scope consumer credit contracts whose object is the granting of consumer credit secured by immovable property[1] (see below Article 2(2)(a)).

SCOPE OF APPLICATION: The Directive applies to credit contracts with the exception of contracts concluded for the continuous provision of services or for the supply of goods of the same type, according to which the consumer pays in installments the price for the said services or goods during their provision (article 3). Also, based on article 2(2), it does not apply in the following cases:

It is important to mention that according to the decision C-127/15, where a debt collection agency intervenes to collect the existing debt, and the agency requires the consumer to repay the total amount of the specific credit and to pay interest or costs that are not was foreseen in the original agreement on the basis of which the credit in question was granted, does not fall within the exemption of Article 2(2)(j) of the Directive – i.e. it is covered by the Directive.[2]

There are also specific credit agreements where specific provisions of the Directive apply. These specific credit agreements are as follows:

• Credit agreements in the form of overdraft facility. Such a credit agreement is an explicit credit agreement whereby a creditor provides a consumer with funds in excess of the current balance of the consumer’s current account.[3]
• Credit agreements in the form of overruning. Such a credit agreement is where there is a tacit acceptance of overdraft whereby the creditor makes available to a consumer funds in excess of the current balance of the consumer’s current account or the agreed overdraft facility.[4]

The MSs have the right to exclude or limit the validity of the Directive to specific credit agreements which are concluded by an organization which is established for the mutual benefit of its members, does not generate profits for persons other than its members, fulfils a social purpose by virtue of internal legislation, receives and manages the savings of its members and provides them with credit and provides credit based on a total annual effective interest rate that is lower than those prevailing in the market or subject to a ceiling determined by national law and whose members can only be the persons residing or working in a particular area or the employees and retired former employees of a particular employer, or persons who meet other criteria defined by national law as a basis for the existence of a common link between the members.

2. SUBSTANTIAL PROVISIONS

2.1.   INFORMATION/LIABILITIES PRELIMINARY TO THE CONCLUSION OF THE CREDIT AGREEMENT

2.1.1.                INFORMATION IN ADVERTISING

Based on Article 4, any advertisement concerning credit agreements which indicates an interest rate or any figures relating to the cost of the credit to the consumer shall include standard information. The information in question is as follows:

TOTAL AMOUNT OF CREDIT: Based on the Directive (article 3(l)) the total amount of credit  means the ceiling or the total sums made available under a credit agreement. According to case C-377/14, the total amount of credit may not include any of the amounts intended to meet the commitments entered into under the relevant credit agreement, such as administrative costs, interest, commissions, and any other type of fee payable by the consumer. The irregular inclusion, in the total amount of the credit, of amounts that are incidental to the total cost of the credit for the consumer will necessarily result in the determination of the APR at a lower level, given that its calculation depends on the total amount of the credit. Therefore, the total amount of credit and the amount that the consumer actually withdraws constitute the amounts made available to the consumer, with the result that the amounts used by the creditor to cover the costs associated with the relevant credit are excluded and which in fact are never made available to that consumer. [5]

EXCEPTION: In cases where the national legislation requires that the advertisement mentions the APR, then it is not necessary to provide any other information.

However, where there is a mandatory additional service related to the credit agreement (i.e. insurance) the cost of which cannot be determined in advance, then the fact that the additional service is mandatory should be stated.

2.1.2.                PRE-CONTRACTUAL INFORMATION

Article 5 refers to the obligation of the creditor/credit intermediary to provide the consumer in good time and before he is bound by any credit agreement with the standardized European Consumer Credit Information. This information is referred to in Annex II and includes information related to the identity and contact details of the creditor/credit broker, key features of the credit product, the cost of the credit, other important legal aspects and finally, additional information in the case of marketing financial services from distance. Additional detailed reference to the said information is made in article 5(1) of the Directive.

In the case of voice telephony communications, the description of the main characteristics of the financial service includes part of the information referred to in Article 5(1).

With regard to contracts concluded at the consumer’s request using a means of distance communication, which does not allow the provision of the information provided for in Article 5(1), (such as voice telephony), the creditor provides the consumer the complete pre-contractual information based on the form for the “standardized European Consumer Credit Information” immediately after the conclusion of the credit agreement.

The consumer should be given a free copy of the draft credit agreement whenever he requests it.

Based on Article 5(5)  in the case of a credit agreement under which payments made by the consumer do not give rise to an immediate corresponding amortisation of the total amount of credit, but are used to constitute capital during periods and under conditions laid down in the credit agreement or in an ancillary agreement, the pre-contractual information required under article 5(1) shall include a clear and concise statement that such credit agreements do not provide for a guarantee of repayment of the total amount of credit drawn down under the credit agreement, unless such a guarantee is given.

With respect to specific credit agreements (such as credit agreements with overdraft facilities) MSs may provide the information referred to in Annex III instead of that in Annex II. Article 6 states what this information is.

EXEMPTIONS FROM THE PRE-CONTRACTUAL INFORMATION REQUIREMENTS: Article 7 states that, Articles 5 and 6 shall not apply to suppliers of goods or services acting as credit intermediaries in an ancillary capacity. This is without prejudice to the creditor’s obligation to ensure that the consumer receives the pre-contractual information referred to in those Articles.

Whether a person is considered a credit intermediary in the context of an ancillary capacity has been explained in case C-127/15. In that case, it was mentioned that based on Article 3(f) of the Directive, the credit intermediary is a natural or legal person who does not act as a creditor and who, in the context of his commercial, business or professional activity and for remuneration which may be monetary or have any other agreed form of financial consideration, proposes or offers credit agreements to consumers, assists consumers by undertaking preparatory work for entering into credit agreements, or concludes credit agreements with consumers on behalf of the creditor. The intermediary in question is subject to the obligations to provide information to consumers provided for in articles 5 and 6 of the Directive. However, according to Article 7, suppliers of goods or services who act as credit intermediaries in an ancillary capacity are not subject to this obligation. That is, where their activity (the provision of credit) is not the main purpose of their commercial, business or professional activities then they have no obligation to provide information.

In cases where a debt collection agency acting on behalf of a creditor to conclude a credit agreement payable in instalments for an overdue amount, under which the consumer undertakes to repay the total amount of the credit and to pay interest and costs, must be classified as a credit intermediary except if the provision of that service is not the main purpose of its trade, business or professional activities. But it is for the national Court to ascertain (on the basis of all the facts of the case) whether the particular agency acts as a credit broker in general or in the context of an ancillary activity.[6]

2.1.3.                OBLIGATION TO ASSESS THE CREDITWORTHINESS OF THE CONSUMER

Based on Article 8 of the Directive, Member States ensure that, before the conclusion of the credit agreement, the creditor assesses the consumer’s creditworthiness on the basis of sufficient information, where appropriate obtained from the consumer and, where necessary, on the basis of a consultation of the relevant database. They must also ensure that if the parties agree to change the total amount of credit after the conclusion of the credit agreement, the creditor updates the financial information at its disposal concerning the consumer and assesses the consumer’s creditworthiness before any significant increase in the total amount of credit.

It is noted that the above article allows creditors to rely only on the information provided by the consumer to check his creditworthiness, given that this is sufficient and that simple statements are accompanied by supporting documents. In addition, the creditor is under no obligation to carry out systematic checks of the information provided by the consumer.[7]

2.2.   BURDEN OF PROOF

The burden of proving the fulfillment of the obligations imposed by articles 5 and 8 of the Directive was examined in case C-499/13. In that case, it was decided that the provisions of the Directive are opposed to a national provision according to which the consumer bears the burden of proof of the non-fulfillment of the obligations imposed by articles 5 and 8. Nor is it possible to have a standard term of the contract which states that the consumer accepts that the creditor has properly fulfilled its pre-contractual obligations and in that way shift the burden of proof to the consumer.[8]

2.3.   INFORMATION OBLIGATIONS ASSOCIATED WITH THE CREDIT AGREEMENT

INFORMATION INCLUDED IN THE CREDIT AGREEMENT: Article 10 of the Directive states that credit agreements shall be drawn up on paper or on another durable medium and all parties shall receive a copy. The credit agreement does not need to be drawn up in a single document if it is drawn up in writing or on another durable medium.[9]

DURABLE MEDIUM: The reference to a “durable medium” is a reference to a medium which should ensure the consumer, in a manner analogous to a document, that he will be in possession of the required information to be able to view, if such need is presented, his rights. Critical elements, in this regard, are that the consumer can store the information addressed to him personally, ensure that its content will not be altered, and that it can be both accessed for as long as needed and reproduced exactly as they have.[10] A key question is whether the medium is a medium resistant to time. If it is, then it is more likely to be considered as a durable medium than not. Therefore, some websites can be characterized as time-resistant media.[11] Such are the cases when the website provides the user with the possibility to store information addressed to him personally, in such a way that he can then consult it for a period of time proportional to the purpose it serves, as well as reproduce it exactly as it is. In addition, in order for a website to be considered a “time-resistant medium” within the meaning of this provision, any possibility of unilateral modification of its content by the payment service provider or by any other professional entrusted with the management of the website must be excluded.[12]

Based on the article 10(2), the credit agreement specify in a clear and concise manner:

According to case C-42/15, this article has the meaning that the credit agreement is not required to specify each payment that the consumer must make by mentioning a specific date, as long as the terms of this agreement make it possible for the consumer to easily specify and with certainty the dates of payments.[13]

 The amortisation table shall indicate the payments owing and the periods and conditions relating to the payment of such amounts; the table shall contain a breakdown of each repayment showing capital amortisation, the interest calculated on the basis of the borrowing rate and, where applicable, any additional costs; where the interest rate is not fixed or the additional costs may be changed under the credit agreement, the amortisation table shall indicate, clearly and concisely, that the data contained in the table will remain valid only until such time as the borrowing rate or the additional costs are changed in accordance with the credit agreement;

It is noted that the credit agreement which has a fixed duration and on the basis of which the capital is repaid by installments, is not required to specify exactly, in the form of an amortisation table, the part of each installment intended for the repayment of the capital. In fact, in case such obligation was imposed by national legislation, this would be considered as contrary to the provisions of the Directive.[14]

Based on Article 10(3), the above statement of account is provided whenever the consumer requests it, free of charge during the credit agreement.

Where the credit agreement provides for an overdraft facility the information specified is less. This is contained in article 10(5) of the Directive.

INFORMATION CONCERNING THE BORROWING RATE : Based on the article 11, the consumer must be informed of any change in the borrowing rate, on paper or another durable medium, before the change enters into force. The information must state the amount of the payments to be made after the entry into force of the new borrowing rate and information about the change. But it is acceptable that parties may agree in the credit agreement that the information referred to in article 11(1) is to be given to the consumer periodically in cases where the change in the borrowing rate is caused by a change in a reference rate, where the new reference rate is made publicly available by appropriate means and  is also kept available in the premises of the creditor.

RIGHTS IN CONNECTION WITH CREDIT AGREEMENTS IN THE FORM OF AN OVERDRAFT FACILITY: Where a credit agreement provides for an overdraft facility, the consumer shall be kept regularly informed by means of a statement of account, on paper or on another durable medium for specific information such as the precise period to which the statement of account relates, the amounts of drawdowns, the balance from the previous statement, the new balance, the borrowing rate applied etc. Again, in such contracts, the consumer must be be informed on paper or another durable medium of increases in the borrowing rate, or in any charges payable, before the change in question enters into force (article 12).

RIGHTS IN OPEN-ENDED CREDIT AGREEMENTS: Article 13 refers to open-ended credit agreements. In such cases the consumer may effect standard termination of an open-end credit agreement free of charge at any time unless the parties have agreed on a period of notice. Such a period may not exceed one month. The creditor may effect standard termination of an open-end credit agreement by giving the consumer at least two months’ notice drawn up on paper or on another durable medium. If agreed in the credit agreement, the creditor may, for objectively justified reasons, terminate the consumer’s right to draw down on an open-end credit agreement.

RIGHT OF WITHDRAWAL: Article 14 refers to the 14-day right of withdrawal of the consumer from the credit agreement. The period starts from the day of the conclusion of the contract or receipt of the terms of the contract and the information according to article 10.

If the consumer exercises his right of withdrawal, in order to give effect to the withdrawal before the expiry of the deadline, he must notify this to the creditor in line with the information given by the creditor pursuant to Article 10(2)(p) by means which can be proven in accordance with national law. The deadline is deemed to have been met if the notification, is on a paper or on another durable medium that is available and accessible to the creditor, is dispatched before the deadline expires; and pay to the creditor the capital and the interest accrued thereon from the date the credit was drawn down until the date the capital is repaid, without any undue delay and no later than 30 calendar days after the despatch by him to the creditor, of notification of the withdrawal. The interest is calculated on the basis of the agreed borrowing rate. The creditor is not be entitled to any other compensation from the consumer in the event of withdrawal, except compensation for any non-returnable charges paid by the creditor to any public administrative body.

The MSs may set a deadline during which the execution of the contract cannot begin.

Ιt is noted that if an ancillary service relating to the credit agreement is provided by the creditor or by a third party on the basis of an agreement between the third party and the creditor, the consumer is no longer be bound by the ancillary service contract if the consumer exercises his right of withdrawal from the credit agreement in accordance with that Article. The same applies in relation to linked credit agreements – that is, based on Article 15, where the consumer has exercised a right of withdrawal, based on Community law, concerning a contract for the supply of goods or services, he is no longer bound by a linked credit agreement.

CONSUMER RIGHTS IN RELATION TO LINKED CREDIT AGREEMENTS: Based on Article 15(2), where the goods or services covered by a linked credit agreement are not supplied, or are supplied only in part, or are not in conformity with the contract for the supply thereof, the consumer shall have the right to pursue remedies against the creditor if the consumer has pursued his remedies against the supplier but has failed to obtain the satisfaction to which he is entitled according to the law or the contract for the supply of goods or services.

RIGHT OF EARLY REPAYMENT: According to Article 16, the consumer is entitled at any time to discharge fully or partially his obligations under a credit agreement. In such cases, he is entitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the contract.

In such a case the creditor is entitled to compensation for possible costs directly linked to early repayment of credit provided that the early repayment falls within a period for which the borrowing rate is fixed. Such compensation may not exceed 1% of the amount of credit repaid early, if the period of time between the early repayment and the agreed termination of the credit agreement exceeds one year. If the period does not exceed one year, the compensation may not exceed 0,5% of the amount of credit repaid early. In no case shall the compensation exceed the interest that would be due from early repayment until the due date. In cases where the creditor requests compensation beyond his actual loss, the consumer may request a corresponding reduction.

In the following cases, compensation for early repayment is not allowed:

ASSIGNMENT OF RIGHTS:  Based on Article 17, in the event of an assignment to a third party, of the creditor’s rights under a credit agreement or the agreement itself, the consumer shall be entitled to plead against the assignee any defence which was available to him against the original creditor, including set-off where the latter is permitted in the Member State concerned.

Finally, it should be mentioned that based on Article 17(2), the consumer must be informed of the assignment referred to except where the original creditor, by agreement with the assignee, continues to service the credit vis-à-vis the consumer.

OVERRUNNING: In relation to current account opening contracts, if there is a possibility of overruning, the contract must also contain the borrowing rate, the conditions governing the application of that rate and any index or reference rate applied to the original borrowing rate, the charges applicable from the time of the conclusion of the credit agreement and, as the case may be, the conditions under which these charges can be changed. This information is regularly provided in writing or on another durable medium.

In the event of a significant overrunning exceeding a period of one month, the creditor shall inform the consumer without delay, on paper or on another durable medium:

ANNUAL PERCENTAGE RATE OF CHARGE: Article 19 of the Directive refers to the method of calculating the APR. It is calculated in accordance with the mathematical formula set out in Part I of Annex I. To calculate the APR the following principles are observed:

• The APR is the total cost of the credit for the consumer, expressed as an annual percentage of the total amount of the credit. The total cost of credit for the consumer is the total of charges, including interest, commissions, taxes and any other kind of fees, which the consumer is required to pay for the credit agreement and which the creditor is aware of, except notarial costs. Costs related to additional services related to the credit agreement, in particular insurance premiums, are also included if, in addition, the conclusion of the service agreement is mandatory for the approval of the credit or for its granting under the terms and conditions advertised.
• In the total cost of credit for the consumer (unless the opening of the account is optional and the costs of the account have been clearly and separately shown in the credit agreement or in any other agreement concluded with the consumer) the costs of maintaining an account recording both payment transactions and drawdowns, the costs of using a means of payment for both payment transactions and drawdowns, and other costs relating to payment transactions are included.
• The costs incurred by the consumer due to breach of any of his obligations under the credit agreement are not taken into account.
• The additional costs to the purchase price that the consumer has to pay when buying goods or services, whether he buys on credit or in cash, are not included.
• The calculation of the APR is based on the assumption that the credit agreement is still valid for its entire agreed duration and that the creditor and the consumer fulfill their obligations in accordance with the terms and on the dates specified in the credit agreement. For credit agreements that contain clauses which allow for the variation of the borrowing rate and, where applicable, of the charges included in the APR, but the amount of which cannot be precisely determined at the time of calculation, the APR is calculated according to the presumption that the interest rate and other costs remain fixed at their initial level and apply until the end of the credit agreement.
• Where necessary, the additional assumptions set out in Annex I may be used in calculating the annual percentage rate of charge (for example, in cases where the credit agreement gives the consumer a right of choice regarding withdrawals, the presumption is that a full and immediate withdrawal of the total amount of the credit is made).

2.4.   EXAMINATION BY THE COURT ON ITS OWN MOTION

According to case C-377/14, a national court has an obligation, in the event that a dispute arises before it, relates to claims arising from a credit agreement within the meaning of the Directive, to examine in its own motion the issue of whether the obligation to provide information provided by this provision, and to give way to all the consequences brought about by the violation of such provision, according to national law, provided that such consequences meet the conditions of article 23 (for sanctions – see section 3.4. below) of the Directive. [15]

3. OBLIGATIONS/CHOICES OF MEMBER STATES

3.1.   PRE-CONTRACTUAL INFORMATION

PRE- CONTRACTUAL INFORMATION: Based on Article 5(6) Member States ensure that creditors and, where applicable, credit intermediaries provide adequate explanations to the consumer, in order to place the consumer in a position enabling him to assess whether the proposed credit agreement is adapted to his needs and to his financial situation, where appropriate by explaining the pre-contractual information to be provided in accordance with paragraph 1, the essential characteristics of the products proposed and the specific effects they may have on the consumer, including the consequences of default in payment by the consumer. Member States may adapt the manner by which and the extent to which such assistance is given, as well as by whom it is given, to the particular circumstances of the situation in which the credit agreement is offered, the person to whom it is offered and the type of credit offered.

According to case C-449/13 although the creditor may provide the consumer with sufficient information, it is possible that based on the assessment of the creditworthiness of the consumer, the specific information needs to be adapted and communicated to the consumer in due time, before signing the credit agreement, without however requiring the drawing up of a specific document. [16]

OBLIGATION TO ASSESS THE CREDIT WORTHINESS OF THE CONSUMER: This is referred to in article 8 and it has been analysed above. However, it should be noted that based on Article 9, each Member State shall, in the case of cross-border credit ensure access for creditors from other Member States to databases used in that Member State for assessing the creditworthiness of consumers. If the credit application is rejected on the basis of consultation of a database, the creditor shall inform the consumer immediately and without charge of the result of such consultation and of the particulars of the database consulted.

3.2.   IN RELATION TO MATTERS RELATING TO THE CREDIT AGREEMENT

RIGHT OF WITHDRAWAL: By virtue of Article 14(7) the Article in question (which deals with withdrawal) applies without prejudice to any rule of national law establishing a period of time during which the performance of the contract may not begin.

EARLY REPAYMENT: In relation to early repayment, Article 16(4) states that Member States have the right to determine that such compensation may be claimed by the creditor only on condition that the amount of the early repayment exceeds the threshold defined by national law but in no case can it be more than €10,000 within a 12-month period.

Also, the Member States can allow a creditor to demand higher compensation where he can prove a loss that exceeds the rates of 0.5% and 1% mentioned in Section 2.3. above.

3.3.   IN RELATION TO CREDITORS AND CREDIT INTERMEDIARIES

REGULATION OF CREDITORS: According to Article 20, Member States must ensure that creditors are supervised by a body or authority independent from financial institutions, or regulated.

OBLIGATIONS OF CREDIT INTERMEDIARIES: Article 21 states that Member States shall ensure the following in relation to credit intermediaries:

3.4.   PENALTIES

Based on Article 23, Member States must lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, proportionate and dissuasive.

Based on case C-42/15 in the event that national legislation makes the contract interest-free and without costs in case of non-compliance with the information duties of Article 10(2), the legislation in question is valid as non-inclusion of the elements of Article 10(2) may call into question the consumer’s ability to assess the content of his commitment.

The deterrent nature of the sanctions was examined in case C-565/12. In that case it was held that the national system of sanctions under which, in case of breach by the creditor of its obligation to assess, before concluding the loan agreement, the creditworthiness of the borrower by carrying out a search in the relevant database, was incompatible with the Directive. The reason was because the sanctions prevented the creditor from collecting contractual interest but allowed him to claim statutory interest from the date of the judgment, which statutory interest was increased by 5% at the expiry of the 2 month period from the judgment if the borrower did not fully repay his debt, with the result that the creditor may, even after the application of the sanction, be in a substantially similar position if he collected the contractual interest.[17]

OUT-OF-COURT DISPUTE RESOLUTION: Member States ensure that adequate and effective out-of-court dispute resolution procedures are in place.

4. OTHER RELEVANT PROVISIONS

Directive 87/102/EEC was repealed with effect from 12 May 2010.

[1] C-602/10, SC Volksbank România SA v. Autoritatea Naţională pentru Protecţia Consumatorilor — Comisariatul Judeţean pentru Protecţia Consumatorilor Călăraşi (CJPC)

[2] C‑127/15, Verein für Konsumenteninformation v. INKO, Inkasso GmbH, para. 39, 41

[3] In such cases, only articles 1-3, 4(1), 4(2)(a)-(c), 4(4), 6-9, 10(1), 10(4), 10(5) apply ), 12,15,17 and 19-32.

[4] In such cases, only articles 1-3, 18, 20, 22 -32 apply.

[5] C-377/14 Ernst Georg Radlinger, Helena Radlingerová ν. FINWAY a.s., παρά 86, 87 και 91

[6] C – 127/15 Verein für Konsumenteninformation v. INKO, Inkasso GmbH, para 43, 44, 46-48, 53

[7] C-449/13, CA Consumer Finance ν. Ingrid Bakkaus, Savary Charline Bonato,

[8] C-449/13, CA Consumer Finance ν. Ingrid Bakkaus, Charline Bonato, Savary, Florian Bonato

[9] C-42/15, Home Credit Slovakia a.s. v. Klára Bíróová

[10] C‑375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG ν. Verein für Konsumenteninformation, para. 42

[11] C‑375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG ν. Verein für Konsumenteninformation, para. 43

[12] C‑375/15, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG ν. Verein für Konsumenteninformation, para. 44

[13][13] C-42/15, Home Credit Slovakia a.s. v. Klára Bíróová

[14] C-42/15, Home Credit Slovakia a.s. v. Klára Bíróová

[15] C-377/14 Ernst Georg Radlinger, Helena Radlingerová ν. FINWAY a.s.

[16] C-449/13, CA Consumer Finance ν. Ingrid Bakkaus, Charline Bonato, Savary, Florian Bonato

[17] C-565/12LCL Le Crédit Lyonnais, SA ν. Fesih Kalhan

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Contracts for the supply of digital content and digital services (Directive 2019-770)

1. PURPOSE OF THE DIRECTIVE

Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services (“Directive“) aims to protect consumers who purchase digital content or services from a trader. The Directive sets rules on:

1. the conformity of digital content or a digital service with the contract,
2. remedies in the event of a lack of such conformity or a failure to supply, and the modalities for the exercise of those remedies, and
3. the modification of digital content or a digital service.

The Directive entered into force on the 1st of January 2022 and applies to the supply of digital content or digital services taking place from that date onwards.

The level of harmonisation imposed to MSs by the Directive is one of maximum harmonisation and according to Article 3 of the Directive, it applies:

“to any contract whereby the trader supplies or undertakes to supply digital content or digital service to the consumer and the consumer pays or undertakes to pay a price”

The fact that the digital content or service is designed according to the consumer’s specifications does not preclude the application of the Directive.

DEFINITION OF PRICE: The definition of price is “money or a digital representation of value” which is paid or agreed to be paid in exchange for the supply of digital content or a digital service. Digital representation of value includes electronic vouchers or coupons as well as virtual coins.  It should be noted that the concept of value includes the provision of personal data by the consumer except where the data provided by the consumer are:

“processed by the trader for the purpose of supplying the digital content or digital service in accordance with this Directive or for allowing the trader to comply with legal requirements to which the trader is subject, and the trader does not process those data for any other purpose.”

Personal data bears the definition included in Regulation (EU) 2016/679 – that is:

“…any information relating to an identified or identifiable natural person (“data subject”); an identifiable natural person is one whose identity can be established, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or one or more factors specific to the physical, physiological, genetic, psychological, economic, cultural or social identity of that natural person”

DIGITAL CONTENT: According to the Directive, digital content is “data which are produced and supplied in digital form”.

DIGITAL SERVICE: A digital service, on the other hand, is
a service that allows the consumer to create, process, store or access data in digital form. It also includes a service that allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service.

CONSUMER AND TRADER: For the purposes of the Directive, the consumer is “any natural person who, in relation to contracts covered by this Directive, is acting for purposes which are outside that person’s trade, business, craft, or profession” and the trader is:

“any natural or legal person, irrespective of whether privately or publicly owned, that is acting, including through any other person acting in that natural or legal person’s name or on that person’s behalf, for purposes relating to that person’s trade, business, craft, or profession, in relation to contracts covered by this Directive”

NON-APPLICABILITY OF THE DIRECTIVE: The Directive does not apply in the following 8 cases:

“a)       the provision of services other than digital services, regardless of whether digital forms or means are used by the trader to produce the output of the service or to deliver or transmit it to the consumer» However, it should be noted that the Directive still applies to the elements of the contract relating to the digital content or service.

b) electronic communications services as defined in Article 2(4) of Directive (EU) 2018/1972, with the exception of number-independent interpersonal communications services as defined in Article 2(7) of that Directive;

c) healthcare as defined in point (a) of Article 3 of Directive 2011/24/EU;

d) gambling services, namely, services that involve wagering a stake with pecuniary value in games of chance, including those with an element of skill, such as lotteries, casino games, poker games and betting transactions, by electronic means or any other technology for facilitating communication and at the individual request of a recipient of such services;

e) financial services as defined in point (b) of Article 2 of Directive 2002/65/EC;

f) software offered by the trader under a free and open-source licence, where the consumer does not pay a price and the personal data provided by the consumer are exclusively processed by the trader for the purpose of improving the security, compatibility or interoperability of that specific software;

g) the supply of digital content where the digital content is made available to the general public other than by signal transmission as a part of a performance or event, such as digital cinematographic projections;

 h) digital content provided in accordance with Directive 2003/98/EC of the European Parliament and of the Council by public sector bodies of the Member States..”

In addition, the Directive does not apply to digital content or digital services embedded in goods with digital elements, i.e. tangible movable items that incorporate, or are inter-connected with, digital content or a digital service in such a way that the absence of that digital content or digital service would prevent the goods from performing their functions.

2. SUBSTANTIVE PROVISIONS

2.1.             In Connection with the Supply of the Digital Content or Digital Service

TIME OBLIGATION TO SUPPLY: Article 5 of the Directive requires the trader to supply the agreed digital content or service in accordance with the terms of the agreement, and where there is no such term as to supply (i.e. delivery), then the supply must be “without undue delay after the conclusion of the contract”.

TIME WHICH THE PURCHASE OF DIGITAL CONTENT OR DIGITAL SERVICE TAKE PLACE: It should be mentioned here that in relation to the point in time when the digital content or service was purchased:

• Digital content is considered to be acquired when “the digital content or any means suitable for accessing or downloading the digital content is made available or accessible to the consumer, or to a physical or virtual facility chosen by the consumer for that purpose;”.
• The digital service “is made accessible to the consumer or to a physical or virtual facility chosen by the consumer for that purpose.”

2.2.             Conformity of the Digital Content or Digital Service

The trader must supply to the consumer digital content or a digital service that meets subjective and objective compliance requirements as well as compliance requirements resulting from poor integration of the digital content or service into the consumer’s digital environment. These situations are discussed below:

2.2.1.               Subjective Requirements for Conformity

Article 7 of the Directives states that in order to comply with the terms of the contract, the digital content or service must:

“a)       be of the description, quantity and quality, and possess the functionality, compatibility, interoperability and other features, as required by the contract;,

b) be fit for any particular purpose for which the consumer requires it and which the consumer made known to the trader at the latest at the time of the conclusion of the contract, and in respect of which the trader has given acceptance;

c) be supplied with all accessories, instructions, including on installation, and customer assistance as required by the contract; and

d) be updated as stipulated by the contract.”

2.2.2.               Objective Requirements for Conformity

Article 8 of the Directive contains the objective conformity requirements for goods – i.e. requirements that are laid down irrespective of the intention of the parties.

PROVISION OF THE MOST RECENT VERSION: Firstly, it should be stated that the digital content or service is provided with the latest version available at the time of the conclusion of the contract unless the parties have agreed otherwise.

OBJECTIVE REQUIREMENTS: Article 8(1) of the Directive states that digital content or digital service:

“a)       be fit for the purposes for which digital content or digital services of the same type would normally be used, considering, where applicable, any existing Union and national law, technical standards or, in the absence of such technical standards, applicable sector-specific industry codes of conduct.

b) be of the quantity and possess the qualities and performance features, including in relation to functionality, compatibility, accessibility, continuity and security, normal for digital content or digital services of the same type and which the consumer may reasonably expect, given the nature of the digital content or digital service and taking into account any public statement made by or on behalf of the trader, or other persons in previous links of the chain of transactions, particularly in advertising or on labelling unless the trader shows that:

i) the trader was not, and could not reasonably have been, aware of the public statement in question.

ii) by the time of conclusion of the contract, the public statement had been corrected in the same way as, or in a way comparable to how, it had been made; or

 iii) the decision to acquire the digital content or digital service could not have been influenced by the public statement.

c) where applicable, be supplied along with any accessories and instructions which the consumer may reasonably expect to receive; and

d) comply with any trial version or preview of the digital content or digital service, made available by the trader before the conclusion of the contract.”

Where the contract provides for the continuous supply of the digital content or service over a period of time, the digital content or service shall be in conformity throughout that period.

UPDATES AND SECURITY UPDATES: With regard to updates, Article 8(2) provides that the trader must ensure that the consumer is informed of and supplied with updates, including security updates, that are necessary to keep the digital content or digital service in conformity, for the period of time:

“a)       during which the digital content or digital service is to be supplied under the contract, where the contract provides for a continuous supply over a period of time; or

b) that the consumer may reasonably expect, given the type and purpose of the digital content or digital service and taking into account the circumstances and nature of the contract, where the contract provides for a single act of supply or a series of individual acts of supply.”

OBLIGATION ON CONSUMERS TO INSTALL UPDATED: Alongside the trader’s obligation to provide updates, the consumer is obliged to install them within a reasonable time. The Directive explicitly states that the trader is not liable for any lack of conformity resulting solely from the lack of updates, provided that:

“a)       the trader informed the consumer about the availability of the update and the consequences of the failure of the consumer to install it; and

b) the failure of the consumer to install or the incorrect installation by the consumer of the update was not due to shortcomings in the installation instructions provided by the trader.”

EXCLUSION OF LIABILITY: Article 8(5) of the Directive provides that if the trader informs the consumer specifically about a particular characteristic of the digital content or digital service which is deviating from the objective requirements of conformity mentioned above, and the costumer expressly and separately accepted the deviation when concluding the contract, then there is no lack of conformity. It should be noted that the exclusion of liability of the trader is only possible at the time of the conclusion of the contract.

2.2.3.               Requirements Regarding the Integration of the Digital Content or Digital Service

Article 9 of the Directive refers to the incorrect integration of digital content or digital service due to a poor integration of the digital content or service into the consumer’s digital environment. In such a case, the content or service is considered to be non-compliant if:

“a)       the digital content or digital service was integrated by the trader or under the trader’s responsibility; or

b) the digital content or digital service was intended to be integrated by the consumer and the incorrect integration was due to shortcomings in the integration instructions provided by the trader.”

2.2.4.               Modification of the Digital Content or Digital Service

Article 19 of the Directive refers to cases where the contract provides that the digital content or digital service is to be supplied or made accessible to the consumer over a period of time – such as, for example, a one-year contract for the supply of anti-virus software, a cloud storage contract for two years or an unlimited subscription to a social media platform.  In such a case Article 19(1) states that:

“the trader may modify the digital content or digital service beyond what is necessary to maintain the digital content or digital service in conformity in accordance with Articles 7 and 8, if the following conditions are met:

a) the contract allows, and provides a valid reason for, such a modification;

b) such a modification is made without additional cost to the consumer;

c) the consumer is informed in a clear and comprehensible manner of the modification”

Based on Article 19(2), the consumer is entitled to terminate the contract if the modification negatively impacts the consumer’s access to, or use of the digital content or digital service, (unless such negative impact is only minor). In such case, the consumer is entitled to terminate the contract free of charge within 30 days of the receipt of the information or of the time when the digital content or digital service has been modified by the trader, whichever is later.

NOTIFICATION BY THE TRADER OF THE AMENDMENT: As to the time which the consumer must be informed that the service or content is being modified, Article 19(1)(d) states that the information shall be given

“in advance on a durable medium of the features and time of the modification and of the right to terminate the contract in accordance with paragraph 2, or of the possibility to maintain the digital content or digital service without such a modification”

TERMINATION OF THE CONTRACT: In the case of a consumer who terminates the contract in accordance with Article 19(2), Articles 15 to 18 of the Directive apply mutatis mutandis.  However, there is neither the right of termination nor the information obligation provided for in Article 19(1)(d) if the trader has given the consumer the opportunity to retain the digital content or service without additional charge and without the modification, and the digital content or service is kept in conformity.

2.2.5.               Third-Party Rights

According to Article 10 of the Directive,

“Where a restriction resulting from a violation of any right of a third party, in particular intellectual property rights, prevents or limits the use of the digital content or digital service in accordance with Articles 7 and 8, Member States shall ensure that the consumer is entitled to the remedies for lack of conformity provided for in Article 14, unless national law provides for the nullity or rescission of the contract for the supply of the digital content or digital service in such cases.”

In short, the above article aims to protect the consumer where a third party obliges the trader to stop infringing his intellectual property rights when such intellectual property have been licensed to the consumer. In such a case the consumer is entitled to remedies for the lack of conformity, unless national law provides for the nullity of the contract, or for its rescission, for example for breach of legal warranty against eviction.

2.3.             Liability of the Trader and Burden of Proof

According to Article 11(1), the trader is liable for any failure to supply the digital content or digital service in accordance with Article 5 (i.e. without delay and within the agreed time).  The burden of proof as to whether or not the digital content or service has been supplied are borne by the trader.

Article 11(2) refers to single acts of supply or a series of individual acts of supply, and in such cases the trader is liable for any lack of conformity under Articles 7, 8 and 9 which exists at the time of supply, without prejudice to Article 8(2)(b). In cases covered by Article 11(2), the burden of proof with regard to whether the supplied digital content or digital service was in conformity at the time of supply shall be on the trader for a lack of conformity which becomes apparent within a period of one year “from the time when the digital content or digital service was supplied.”

If, under national law, the trader is only liable for lack of conformity that becomes apparent within a period of time after the supply, that period must not be less than two years from the time of supply, without prejudice to Article 8(2)(b). Indeed, based on the same article, MSs must ensure that such limitation period allows the consumer to exercise the remedies laid down in Article 14 for any lack of conformity that exists at the time indicated in the first subparagraph and becomes apparent within the period of time indicated in the second subparagraph.

Article 11(3) states that in the event that the contract provides for the continuous supply over a period of time, the trader shall be liable for a lack of conformity under Articles 7, 8 and 9, that occurs or becomes apparent within the period of time during which the digital content or digital service is to be supplied under the contract.

MSs shall ensure that such limitation period allows the consumer to exercise the remedies laid down in Article 14 for any lack of conformity that occurs or becomes apparent during the period of time referred to in the first subparagraph.

In relation to the burden of proof for cases subject to Article 11(3), as to whether the digital content or digital service was in conformity within the period of time during which the digital content or digital service is to be supplied under the contract, it is the trader who has to prove that there was no lack of conformity if such lack of conformity becomes apparent within that period.

According to Article 12(4), the burden of proof relating to the conformity of the content of the contract is not on the trader, provided that the trader demonstrates that the digital environment of the consumer is not compatible with the technical requirements of the digital content or digital service and where the trader informed the consumer of such requirements in a clear and comprehensible manner before the conclusion of the contract. To determine this, the consumer must cooperate with the trader, to the extent reasonably possible and necessary, to ascertain whether the cause of the lack of conformity of the digital content or digital service at the time specified in Article 11(2) or (3), as applicable, lay in the consumer’s digital environment. Based on Article 12(5):

“the obligation to cooperate shall be limited to the technically available means which are least intrusive for the consumer. Where the consumer fails to cooperate, and where the trader informed the consumer of such requirement in a clear and comprehensible manner before the conclusion of the contract, the burden of proof with regard to whether the lack of conformity existed at the time specified in Article 11(2) or (3), as applicable, shall be on the consumer.”

2.4.             Consumer Rights

2.4.1.               Right to Bring into Conformity

According to Article 14(1) the consumer is entitled to have the digital content or digital service brought into conformity, to receive a proportionate reduction in the price, or to terminate the contract. Article 14(2) states that the consumer is entitled to have the digital content or digital service brought into conformity, unless this would be impossible or would impose costs on the trader taking into account all of the circumstances of the case, including:

“a)       the value the digital content or digital service would have if there were no lack of  conformity; and

b) the significance of the lack of conformity.”

HOW CONFORMITY IS EFFECTED: According to article 14(3), the trader must bring the digital content or digital service into conformity within a reasonable time from the time the trader has been informed by the consumer about the lack of conformity, free of charge and without any significant inconvenience to the consumer, taking into account the nature of the digital content or digital service and the purpose for which the consumer required the digital content or digital service.

According to article 14(4), the consumer is entitled to either a proportionate reduction of the price, where the digital content or digital service is supplied in exchange for a payment of a price, or the termination of the contract.

PRICE REDUCTION: The reduction in price is proportionate to the decrease in the value of the digital content or digital service which was supplied to the consumer compared to the value that the digital content or digital service would have if it were in conformity.

Where the contract stipulates that the digital content or digital service is to be supplied over a period of time in exchange for the payment of a price, the reduction in price applies to the period of time during which the digital content or digital service was not in conformity.

2.4.2.               Termination of the Contract due to Lack of Conformity

TERMINATION OF THE CONTRACT: For the consumer to be able to terminate the contract, the lack of conformity must not be insignificant and one of the following conditions must be met.

“a)       the remedy to bring the digital content or digital service into conformity is impossible or disproportionate in accordance with paragraph 2;

b) the trader has not brought the digital content or digital service into conformity in accordance with paragraph 3;

c) a lack of conformity appears despite the trader’s attempt to bring the digital content or digital service into conformity;

d) the lack of conformity is of such a serious nature as to justify an immediate price reduction or termination of the contract; or

e) the trader has declared, or it is clear from the circumstances, that the trader will not bring the digital content or digital service into conformity within a reasonable time, or without significant inconvenience for the consumer.”

2.4.3.               Termination of the Contract due to Failure to Supply

RIGHT OF TERMINATION: Based on Article 13(1), where the trader has failed to supply the digital content or digital service in accordance with Article 5, the consumer can call upon the trader to supply the digital content or digital service. If the trader then fails to supply the digital content or digital service without undue delay, or within an additional period of time, as expressly agreed to by the parties, the consumer is entitled to terminate the contract.

In the following cases, the consumer may terminate the contract directly.  That is where:

“a)       the trader has declared, or it is equally clear from the circumstances, that the trader will not supply the digital content or digital service;

b) the consumer and the trader have agreed, or it is clear from the circumstances attending the conclusion of the contract, that a specific time for the supply is essential for the consumer and the trader fails to supply the digital content or digital service by or at that time.”

Where the consumer terminates the contract under paragraphs 1 or 2 of Article 13, Articles 15 to 18 shall apply mutatis mutandis.

2.4.4.               Rights in case of Termination

EXERCISE OF THE RIGHT OF TERMINATION: According to Article 15, the consumer is allowed to exercise the right to terminate the contract by means of a statement to the trader expressing the decision to terminate the contract.

OBLIGATIONS OF THE TRADER IN THE EVENT OF TERMINATION: Article 16 of the Directive refers to the trader’s obligations in the event of termination of the contract by the consumer. In such a case, the trader must reimburse the consumer for all sums paid under the contract.

REPAYMENT OF THE PRICE PRO-RATA: When the contract provides for the supply of the digital content or digital service in exchange for a payment of a price and over a period of time, and the digital content or digital service had been in conformity for a period of time prior to the termination of the contract, the trader must reimburse the consumer only for the proportionate part of the price paid corresponding to the period of time during which the digital content or digital service was not in conformity, and any part of the price paid by the consumer in advance for any period of the contract that would have remained had the contract not been terminated.

PERSONAL DATA: In the case of termination of the contract, the trader must comply with the obligations applicable under Regulation (EU) 2016/679and must refrain from using any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader, except where such content:

“a)       has no utility outside the context of the digital content or digital service supplied by the trader;

b) only relates to the consumer’s activity when using the digital content or digital service supplied by the trader;

c) has been aggregated with other data by the trader and cannot be disaggregated or only with disproportionate efforts; or

d) has been generated jointly by the consumer and others, and other consumers are able to continue to make use of the content.”

In the case referred to in (d) above, the trader must, at the request of the consumer, make available to the consumer any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader.

The consumer is entitled to retrieve that digital content free of charge, without hindrance from the trader, within a reasonable time and in a commonly used and machine-readable format.

Without prejudice to this, the trader may prevent any further use of the digital content or digital service by the consumer, in particular by making the digital content or digital service inaccessible to the consumer or disabling the user account of the consumer.

OBLIGATIONS OF THE CONSUMER IN THE EVENT OF TERMINATION: According to the article 17(1), after the termination of the contract, the consumer must refrain from using the digital content or digital service and from making it available to third parties. In case that the digital content was supplied on a tangible medium, the consumer must, at the request and at the expense of the trader, return the tangible medium to the trader without undue delay. If the trader decides to request the return of the tangible medium, that request must be made within 14 days of the day on which the trader is informed of the consumer’s decision to terminate the contract.

It should be noted that the consumer is not liable to pay for any use made of the digital content or digital service in the period, prior to the termination of the contract, during which the digital content or the digital service was not in conformity.

2.4.5              Time Limits for Refunds by the Trader

TIME LIMITS FOR REIMBURSEMENT: Article 18(1) states that refunds by the trader to the consumer for a reduction of the price or termination of the contract must be carried out without undue delay and, in any event, within 14 days of the date on which the trader is informed of the consumer’s decision to invoke the consumer’s right for a price reduction or to terminate the contract.

Based on article 18(2), the trader must carry out the reimbursement using the same means of payment as the consumer used to pay for the digital content or digital service, unless the consumer expressly agrees otherwise, and provided that the consumer does not incur any fees as a result of such reimbursement.

It is noted that the trader must not impose any fee on the consumer in respect of the reimbursement.

2.4.6 Right of Redress by the Trader

According to Article 20 of the Directive:

“Where the trader is liable to the consumer because of any failure to supply the digital content or digital service, or because of a lack of conformity resulting from an act or omission by a person in previous links of the chain of transactions, the trader shall be entitled to pursue remedies against the person or persons liable in the chain of commercial transactions. The person against whom the trader may pursue remedies, and the relevant actions and conditions of exercise, shall be determined by national law.”

The above right, is the right of the trader to take action against a previous service supplier if the former is contractually bound to a consumer and breaches its contract with the consumer and the breach is attributable to the previous supplier.

3. Obligations of Member States

According to Article 21 of the Directive, MSs must ensure that adequate and effective means exist to ensure compliance with this Directive. Such means include provisions whereby one or more of the following bodies, as determined by national law, may take action under national law before the courts or before the competent administrative bodies to ensure that the national provisions transposing this Directive are applied:

“a)       public bodies or their representatives.

b) consumer organisations having a legitimate interest in protecting consumers.

c) professional organisations having a legitimate interest in acting;

d) not-for-profit bodies, organisations, or associations, active in the field of the protection  of data subjects’ rights and freedoms as defined in Article 80 of Regulation (EU) 2016/679.”

4. OTHER RELEVANT PROVISIONS

4.1.             Enforcement

Article 22(1) states that any contractual term which, to the detriment of the consumer, excludes the application of the national measures transposing this Directive, derogates from them or varies their effects before the failure to supply or the lack of conformity is brought to the trader’s attention by the consumer, or before the modification of the digital content or digital service in accordance with Article 19 is brought to the consumer’s attention by the trader, shall not be binding on the consumer.

It should be noted however, that traders can offer consumers contractual arrangements that go beyond the protection provided by the Directive.

4.2.             Amendments

Article 23 amends Regulation (EU) 2017/2394 and Directive 2009/22/EC.

4.3.             Review

According to Article 25, the Commission will review the application of the Directive and submit a report to the European Parliament, to the Council and to the European Economic and Social Committee. The report shall examine, inter alia, the case for harmonisation of rules applicable to contracts for the supply of digital content or digital services other than that covered by this Directive, including supplied against advertisements.

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Contracts for the sale of goods  (Directive 2019/771)

1. PURPOSE OF THIS DIRECTIVE

Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC and repealing Directive 1999/44/EC (“the Directive”) which entered into force in all Member States (“MS”) on 1 January 2022, aims to contribute to the smooth functioning of the internal market and to set a high level of protection for consumers in relation to sales contracts concluded between consumers and sellers and provides for rules relating to the conformity of goods with the sales contract, possibility of redress in the event of lack of such conformity, the means of exercising remedies and commercial warranties. The primary purpose is to place on traders a duty to guarantee the products they make available to consumers by also including goods available on the market with digital elements thus protecting consumers not only from hardware defects but also from software defects. An additional intention of the legislator in addition to the protection of consumers, as derived from the Directive, is also the protection of the environment since through the guarantees provided, microlife of the products is indirectly prohibited.

LEVEL OF HARMONISATION: The Directive is of maximum harmonization, since one of its main objectives is to strengthen the legal certainty required in order to strengthen the confidence of consumers (in the product market and especially in the cross-border product market) and sellers (especially in their establishment but also when they make their products available in other Member States). In the recitals of the Directive, it seems that the argument is strongly put forward that the differences in the way of application of legislative rules on the sale of goods between Member States, may negatively affect businesses and consumers since businesses may be burdened with additional compliance costs as a result of which they prefer to operate in the domestic market.

By laying down uniform rules across sales channels (personal contact sales and distance sales, etc) the Directive aims to avoid any divergence that would create disproportionate burdens for the growing number of omni-channel retailers in the Union.

SCOPE: The directive applies to sales contracts between a consumer and a seller as this is defined below.

CONSUMER: A consumer is any natural person who, in relation to contracts covered by this Directive, is acting for purposes which are outside that person’s trade, business, craft or profession. In case the consumer acts for a dual purpose, it is left to the Member States to decide whether the contract falls within the Directive. Also, MSs may, if they wish, extend the protection provided by the Directive to non-consumers such as government organisations, start-ups or SMEs.

SELLER: According to article 2 of the Directive, “seller” means any natural person or any legal person, irrespective of whether privately or publicly owned, that is acting, including through any other person acting in that natural or legal person’s name or on that person’s behalf, for purposes relating to that person’s trade, business, craft or profession, in relation to contracts covered by the Directive.

Platform providers are also sellers within the scope of this Directive if they act for purposes relating to their own business activity and they act as the consumer’s direct counterparties for the sale of goods. It is noted that MSs remain free to extend the application of the Directive to platform providers that do not meet the requirements to qualify as “sellers”.

SALES CONTRACT: Based on the Directive, a “sales contract” means any contract under which the seller transfers or undertakes to transfer ownership of goods to a consumer, and the consumer pays or undertakes to pay the price. If the sales contract contains a service (eg installation of goods), it is up to each MS to decide whether it falls within the definition of a sales contract. The Directive does not refer to the transfer of the risk of the goods, nor to issues of breach of contract for delay in delivery. These matters are covered by Directive 2011/83/EU:

Α. Therefore, risk in respect of products shipped to the consumer is transferred to the consumer only when the consumer or a third party designated by the consumer has obtained physical possession of the goods.

Β. Regarding delivery, the goods must be delivered within 30 days of the conclusion of the contract unless the parties have agreed otherwise. If they are not delivered within said period, the consumer must give an additional period in accordance with the circumstances of the case and in case the trader does not deliver within this second period, the consumer is entitled to terminate the contract.

The goods covered by the Directive may be existing or goods to be manufactured or produced in the future and they include:

  a) any tangible movable items. It is noted that water, gas and electricity are to be considered as goods within the meaning of this Directive when they are put for sale in a limited volume or a set quantity and

  b) any tangible movable items that incorporate or are inter-connected with digital content or a digital service in such a way that the absence of that digital content or digital service would prevent the goods from performing their functions (“goods with digital elements”).

DIGITAL CONTENT: According to article 2(6) of the Directive, “digital content”, means data which are produced and supplied in digital form and may be pre-installed at the time of the contract of sale or, where the contract so provides, may be installed subsequently.

DIGITAL SERVICE:  According to article 2(7) of the Directive, «digital service» is:

1. a service that allows the consumer to create, process, store or access data in digital form;
2. a service that allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service.

Digital services include software provided in a cloud computing environment, the continuous provision of traffic data to a navigation system, or the continuous provision of personalized training programs in the case of a smart watch.

It is important to note that, based on Article 3(3), the Directive does not apply to contracts for the provision of digital content or digital services  except where these are provided with goods as mentioned above. Whether the provision of the digital content or digital service embedded in or interconnected with the goods forms part of the contract of sale with the seller should depend on the content of every contract. Such is the case where (a) it is expressly provided for in the contract, or (b) where a good is expected to include embedded or interconnected digital content or services, or (c) where there have been public statements by the seller or other persons at earlier stages of the transaction chain, including the producer, about such content or services.  The fact that the consumer would have to download some software to his or her phone in order for the smart watch to work makes the smart watch a “digital good” under the Directive since the application is considered an “interconnected digital item.”

In case of doubt as to whether the provision of embedded or interconnected digital content or an embedded or interconnected digital service is part of the sales contract, the digital content or digital service shall be presumed to be covered by the sales contract.

WHEN DOES THE DIRECTIVE NOT APPLY: Under Article 3(4), the Directive does not apply to:

a) any tangible medium which serves exclusively as a carrier for digital content; or

b) any goods sold by way of execution or otherwise by authority of law.

The MSs have the option to exclude from the scope of the Directive, sales contracts for second-hand goods sold at public auctions and live animals.  It should be noted that the Directive is without prejudice to national law to the extent that the relevant issues are not regulated by it, such as the legality of goods, damages and aspects of general contract law, such as the formation, validity, nullity or effects of contracts.

2. SUBSTANTIVE PROVISIONS

2.1.           Compliance of goods

According to Article 5 of the Directive, the seller is obliged to deliver to the consumer goods that comply with the requirements of the Directive. Recital 29 of the Directive states that:

«Conformity should be assessed, inter alia, by considering the purpose for which goods of the same type would normally be used, whether they are supplied with the accessories and instructions that the consumer can reasonably expect to receive or whether they correspond to the sample or model that the seller made available to the consumer. The goods should also possess the qualities and features which are normal for goods of the same type and which the consumer can reasonably expect, given the nature of the goods and taking into account any public statement made by or on behalf of the seller or other persons in previous links of the chain of transactions.»

Compliance requirements are divided into subjective and objective requirements. It should be noted that the Directive allows sellers to offer consumers rights that go beyond those provided for in the Directive.

2.1.1.            Subjective Conformity Requirements

The subjective conformity requirements are contained in Article 6 of the Directive and relate to matters agreed between the consumer and the seller on the basis of communication between them (irrespective of how the communication was made – whether by description, instructions, dissemination of information, etc.). This article states that for goods to be considered as compliant with the terms of the sales contract, the goods must, where applicable:

 «a) be of the description, type, quantity and quality, and possess the functionality, compatibility, interoperability and other features, as required by the sales contract

b) be fit for any particular purpose for which the consumer requires them and which the consumer made known to the seller at the latest at the time of the conclusion of the sales contract, and in respect of which the seller has given acceptance

c) be delivered with all accessories and instructions, including on installation, as stipulated by the sales contract; and

d) be supplied with updates as stipulated by the sales contract.»

Furthermore, to the extent that any pre-contractual statement forming part of the sales contract contains specific information on durability, the consumer should be able to rely on it in the context of subjective compliance criteria. It is important to state that the requirements in the contract which are deemed to have been agreed include those arising from the pre-contractual information under Directive 2011/83/EU since such information forms an integral part of the contract of sale.

2.1.2.            Objective Conformity Requirements

Article 7(1) concerns the objective conformity requirements. The objective requirements are in fact implied terms of the contract which apply to all contracts for the sale of consumer goods. Under Article 7(1), the goods must:

«a) be fit for the purposes for which goods of the same type would normally be used, taking into account, where applicable, any existing Union and national law, technical standards or, in the absence of such technical standards, applicable sector-specific industry codes of conduct·

b) where applicable, be of the quality and correspond to the description of a sample or model that the seller made available to the consumer before the conclusion of the contract·

c) where applicable, be delivered along with such accessories, including packaging, installation instructions or other instructions, as the consumer may reasonably expect to receive; and

d) be of the quantity and possess the qualities and other features, including in relation to durability, functionality, compatibility and security normal for goods of the same type and which the consumer may reasonably expect given the nature of the goods and taking into account any public statement made by or on behalf of the seller, or other persons in previous links of the chain of transactions, including the producer, particularly in advertising or on labelling..»

INFORMATION RELATING TO GOODS WITH DIGITAL ELEMENTS: In the case of goods with digital elements, the seller must ensure that the consumer is informed of and supplied with updates, including security updates, that are necessary to keep those goods in conformity:

«a) that the consumer may reasonably expect given the type and purpose of the goods and the digital elements, and taking into account the circumstances and nature of the contract, where the sales contract provides for a single act of supply of the digital content or digital service; or

b) indicated in Article 10(2) or (5), as applicable, where the sales contract provides for a continuous supply of the digital content or digital service over a period of time.»

It is noted that, where the consumer fails to install updates supplied in accordance with paragraph 3 within a reasonable time, the seller is not liable for any lack of conformity resulting solely from the non-installation or defective installation of the relevant update, provided that:

«a) the seller informed the consumer about the availability of the update and the consequences of the failure of the consumer to install it; and

 b) the failure of the consumer to install or the incorrect installation by the consumer of the update was not due to shortcomings in the installation instructions provided to the consumer.»

PUBLIC STATEMENTS: Article 7(1)(d) of the Directive states that the seller is not bound by public statements if the seller proves that:

«a) the seller was not, and could not reasonably have been, aware of the public statement in question;

b) by the time of conclusion of the contract, the public statement had been corrected in the same way as, or in a way comparable to how, it had been made; or

c) the decision to buy the goods could not have been influenced by the public statement.»

EXCLUSION OF LIABILITY: According to Article 7(5) of the Directive, the seller is allowed to inform the consumer specifically that a particular characteristic of the goods deviated from the objective conformity requirements. Article 7(5) states that:

«There shall be no lack of conformity within the meaning of paragraph 1 or 3 if, at the time of the conclusion of the sales contract, the consumer was specifically informed that a particular characteristic of the goods was deviating from the objective requirements for conformity laid down in paragraph 1 or 3 and the consumer expressly and separately accepted that deviation when concluding the sales contract.»

2.1.3.            Incorrect Installation of the goods

As a general rule, the seller is not liable for the installation of goods except where this has been agreed. If this has been agreed, but due to the defective installation of the goods there is a lack of conformity, the seller is liable.  Furthermore, any lack of conformity resulting from:

«…the incorrect installation of the digital content or digital service incorporated in or inter-connected with the goods, should be regarded as a lack of conformity, where the installation was performed by the seller or under the seller’s control.»

Where the installation was carried out by the consumer and the goods show a lack of conformity due to shortcomings in the installation instructions provided by the seller or, in the case of goods with digital elements, by the seller or by the provider of the digital content or service, then the seller is also liable.

2.1.4.            Third-Party Rights

Where a restriction resulting from a violation of any right of a third party, in particular intellectual property rights, prevents or limits the use of the goods according to the contract, MSs ensure that in such cases the consumer is entitled to the remedies for lack of conformity provided for in Article 13, unless national law provides for the nullity or rescission of the sales contract in such cases.

2.2.           Period of the Seller’s Liability

PERIOD OF LIABILITY: Based on Article 10(1) of the Directive, the seller shall be liable to the consumer for any lack of conformity which exists at the time when the goods were delivered and which becomes apparent within two years of that time. The same applies in relation to goods with digital elements, but there is no reference to whether the 2-year period starts to run from the day the digital elements or the service is loaded onto the goods. However, it appears from recital 39 of the Directive that the supply of goods with digital content is deemed to take place when the physical elements of the goods have been delivered and the individual act of supplying the digital content or service has been carried out or the continuous supply of the digital content or service over a period of time has begun.

It is noted that where the contract provides for the continuous provision of digital content or service for more than two years, the seller is liable for any non-compliance of the digital content or service that arises or becomes apparent within the period during which the digital content or service must be provided under the sales contract.  This means that account is taken of the period of time during which the consumer can reasonably expect to receive updates taking into account the circumstances and the nature of the sales contract.  According to recital 36 of the Directive.:

«…A consumer would normally expect to receive updates for at least as long as the period during which the seller is liable for a lack of conformity, while in some cases the consumer’s reasonable expectation could extend beyond that period, as might be the case particularly with regard to security updates. In other cases, for instance as regards goods with digital elements the purpose of which is limited in time, the seller’s obligation to provide updates would normally be limited to that time.»

INSTALLATION: If the goods are installed by the seller without the consumer being able to use the goods or detect the defect before installation, delivery is deemed to have taken place after installation has been completed.

USED GOODS: The same liability period applies to second-hand goods unless the MSs decide that this period can be shorter than two years – provided that it is not shorter than one year. It is noted that the liability period may be extended by the MSs without any limitation.

2.3.           Remedies for lack of conformity

There are various ways in which the seller is obliged to provide a remedy to the consumer in case of non-compliance of the goods. Article 13(1) firstly mentions restoration of the conformity of the goods, secondly, reduction of the price and thirdly, termination of the contract in accordance with the terms of Article 13.

RIGHT OF WITHHOLDING PAYMENT: Before exercising the above rights, the consumer is entitled to the right to withhold the balance of the price or part of it until the seller has fulfilled his obligations under the Directive. Member States may determine the conditions and the ways in which the consumer may exercise the right of withhold payment.

2.3.1.            Restoration of Conformity

The restoration of conformity can be achieved in two ways: repair or replacement of the goods. Article 14 contains the details of these rights. According to Article 14(1), repair or replacement is carried out.:

«a) free of charge· 

b) within a reasonable period of time from the moment the seller has been informed by the consumer about the lack of conformity; And

c) without any significant inconvenience to the consumer, taking into account the nature of the goods and the purpose for which the consumer required the goods.»

It should be noted that although the Directive provides for the repair of the goods, it does not oblige sellers to ensure the availability of spare parts during a certain period of time.

Where the non-compliance is remedied by repair or replacement of the goods, the consumer makes the goods available to the seller and the seller recovers them at his own expense.

INSTALLATION: Special provision is made in cases where the goods have been installed in a manner consistent with their nature and purpose before the non-compliance becomes apparent under Article 14(3). In such cases:

« the obligation to repair or replace the goods shall include the removal of the non-conforming goods, and the installation of replacement goods or repaired goods, or bearing the costs of that removal and installation.»

ORDINARY USE OF GOODS: In cases where the consumer uses goods which are not in conformity with the contract, the Directive states (thereby adopting what was mentioned in Case C-404/06 – Quelle AG) that the consumer is not obliged to pay for their normal use during the period preceding their replacement.

WHEN IS RESTORATION OF CONFORMITY NOT POSSIBLE: According to Article 13(2) the restoration of conformity is not possible when:

«…the remedy chosen would be impossible or, compared to the other remedy, would impose costs on the seller that would be disproportionate, taking into account all the circumstances, including:

a) the value the goods would have if there were no lack of conformity;

b) the significance of the lack of conformity; and

c) whether the alternative means of redress could be completed without significant inconvenience to the consumer.»

For example, it may be disproportionate to require the replacement of goods because of a small mark if the replacement would incur significant costs and the mark could be easily repaired.

Under Article 13(3), repair or replacement is also impossible if the seller justifiably refuses. Such is the case where «the repair and replacement are impossible or would impose costs on the seller that would be disproportionate, taking into account all circumstances including those mentioned in points (a) and (b) of paragraph 2.» For example, when the goods are located in a place other than the place where they were originally delivered, the shipping and transport costs could be disproportionate for the seller.  In such a case, it does not mean that the consumer is left without a remedy – it simply means that the consumer is entitled to the other remedies which may be more beneficial to the consumer.

2.3.2.            Price Reduction

According to Article 15, the reduction of the price «is proportionate to the decrease in the value of the goods which were received by the consumer compared to the value the goods would have if they were in conformity» with the contract.

The possibility to reduce the price is available under Article 13(4) in the following cases:

«a) the seller has not completed repair or replacement or, where applicable, has not completed repair or replacement in accordance with Article 14(2) and (3), or the seller has refused to bring the goods into conformity in accordance with paragraph 3 of this Article·

b) a lack of conformity appears despite the seller having attempted to bring the goods into conformity·

c) the lack of conformity is of such a serious nature as to justify an immediate price reduction or termination of the sales contract; or ·

d) the seller has declared, or it is clear from the circumstances, that the seller will not bring the goods into conformity within a reasonable time, or without significant inconvenience for the consumer. »

Relevant to points (a) and (b) is paragraph 52 of the preamble which states the following:

«Where the seller has taken action to bring the goods into conformity but a lack of conformity becomes apparent subsequently, it should be objectively determined whether the consumer should accept further attempts by the seller to bring the goods into conformity, taking into account all the circumstances of the case, such as the type and the value of the goods, and the nature and the significance of the lack of conformity. In particular, for expensive or complex goods it could be justified to allow the seller another attempt to remedy the lack of conformity. It should also be taken into account whether the consumer can be expected to maintain confidence in the ability of the seller to bring the goods into conformity or not, for instance, due to the same problem appearing twice.»

In relation to point 13(4)(d), the MSs must interpret the meaning of «of reasonable time for completing repair or replacement, by providing for fixed periods that could generally be considered reasonable for repair or replacement, in particular with regard to specific categories of products»

2.3.3.            Termination of the contract.

Termination of the contract is permissible for the same reasons as those provided for a reduction of the price. Thus, the consumer may terminate the contract instead of requesting a reduction of the price except where the lack of conformity is minor.  According to Article 13(5) of the Directive, the burden of proving that the lack of conformity is minor lies with the seller.

METHOD OF EXERCISE: According to Article 16(1) of the Directive, «the consumer shall exercise the right to terminate the sales contract by means of a statement to the seller expressing the decision to terminate the sales contract.» At the time the termination right is exercised, the consumer must (a) return the goods to the seller at the seller’s expense and (b) the seller must refund the price to the consumer.  MSs are free to provide for time limits for the return of the price or goods.

NON-CONFORMING GOODS: Where the non-compliance concerns only some of the goods delivered under the sales contract and there are grounds for termination, the consumer may terminate the entire sales contract if it is not reasonable to expect the consumer to agree to keep only the compliant goods.

2.3.4.            Commercial Guarantees

A positive addition to the Directive is the introduction of rules on commercial guarantees. This was because there was the potential for consumer confusion as there was no clear distinction between a legal guarantee and a commercial guarantee. The commercial guarantee is independent of and additional to the legal guarantee, the latter being automatically granted to the consumer. In the event that a person on the side of the sales chain decides to provide a commercial guarantee, this is considered to be additional to the legal guarantee.

According to the Directive, a “commercial guarantee” is:

«any undertaking by the seller or a producer (the guarantor) to the consumer, in addition to the seller’s legal obligation relating to the guarantee of conformity, to reimburse the price paid or to replace, repair or service goods in any way if they do not meet the specifications or any other requirements not related to conformity set out in the guarantee statement or in the relevant advertising available at the time of, or before the conclusion of the contract·»

According to Article 17(1) the commercial guarantee is binding on the guarantor under the conditions set out in the commercial guarantee statement and in the relevant advertisement existing at the time of or before the conclusion of the sales contract.

Where a producer provides a commercial guarantee to the consumer regarding the durability of certain goods for a certain period of time, the producer is directly liable to the consumer for the duration of the commercial guarantee regarding durability, for the repair or replacement of the goods. If advertising is more favourable than the terms of the commercial guarantee, then the producer is bound by the advertising rather than by the less favourable terms of the commercial guarantee.  This is unless prior to the conclusion of the sales contract the relevant advertisement had been corrected in the same or a similar manner to the one that took place.

WHAT IS INCLUDED: Under Article 17(2), the commercial guarantee statement is provided to the consumer on a durable medium at the time of delivery of the goods the latest.  A fixed medium is:

«any instrument which enables the consumer or the seller to store information addressed personally to that person in a way that is accessible for future reference, for a period of time adequate for the purposes of the information, and which allows the unchanged reproduction of the information stored·»

The commercial guarantee statement shall be in plain and intelligible language and shall include the following:

«a) a clear statement that the consumer is entitled by law to remedies from the seller free of charge in the event of a lack of conformity of the goods and that those remedies are not affected by the commercial guarantee;

b) the name and address of the guarantor;

c) the procedure to be followed by the consumer to obtain the implementation of the commercial guarantee;

d) the designation of the goods to which the commercial guarantee applies; and

e) the terms of the commercial guarantee

2.3.5.            Right of Redress

According to Article 18 of the Directive, if a seller is liable to a consumer for lack of conformity for which a person at an earlier stage in the transaction chain is responsible, it gives the seller the right to seek redress from the person or persons responsible in the transaction chain. Note that failure to provide updates to goods with digital data under Article 7(3) is included in the failures that give the seller the right to bring a claim against another person in the chain.

It is noted that MSs may adopt rules for allowing the consumer to act directly against against a person responsible in the transaction chain.

2.3.6.            Mandatory Nature

According to Article 21 of the Directive, any contractual agreement which, to the detriment of the consumer, excludes the application of the Directive, derogates from it or alters its effect before the lack of conformity of the goods has been brought to the seller’s attention by the consumer, is not binding on the consumer.

Based on the above article, there are two things to note. First, it is permissible for a consumer to disclaim liability later on when he becomes aware of the compliance and second, it is permissible for producers in the chain of agreements to disclaim liability to persons in that chain other than consumers. It is also recalled that under Article 7(5) of the Directive, the seller may exclude liability for breach of the objective compliance requirements when this is done by specific notification to the consumer.

2.3.7.            Examination of certain matters by the Court

Useful guidance on the examination of certain issues relating to this Directive is provided by the case law of the CJEU, which was based on the repealed Directive 1999/44/EC. Our view is that case law based on the repealed Directive 1999/44/EC, remains relevant.

SELF-EXAMINATION IF THE PURCHASER IS A CONSUMER:   According to judgment C497/13, a national court seized of a dispute concerning a contract which may fall within the scope of the repealed directive must, where it has the legal or factual elements necessary for that purpose or can obtain those elements through a simple request for clarification, ascertain whether the purchaser can be classified as a consumer within the meaning of that directive, even if the purchaser has not relied on that status.

EXAMINATION OF INFRINGEMENT OF THE DIRECTIVE ON THE COURT’S OWN MOTION: The national court is also obliged to examine on its own motion whether the provisions of the repealed directive have been infringed. This was decided in case C-32/12 and confirmed in case C 377/14:

«…it is appropriate to note that the Court has recalled on a number of occasions the obligation of national courts to examine of their own motion infringements of EU consumer protection legislation (see, to that effect, with regard to Directive 93/13, judgment of 4 June 2009 in Pannon GSM, C‑243/08, EU:C:2009:350, paragraph 32; with regard to Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31), judgment of 17 December 2009 in Martín Martín, C‑227/08, EU:C:2009:792, paragraph 29; and, with regard to Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees…»

AWARD OF DAMAGES ON THE COURT’S OWN MOTION: It also appears that, based on the case law of the CJEU regarding the application of the Directive, the national court should on its own motion assist the consumer in cases where he claims one of the remedies provided for in the Directive but fails. In other words, the Court should check whether he can use an alternative remedy provided for by the Directive. According to Case C-32/12:

“…Directive 1999/44 must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which does not allow the national court hearing the dispute to grant of its own motion an appropriate reduction in the price of goods which are the subject of a contract of sale in the case where a consumer who is entitled to such a reduction brings proceedings which are limited to seeking only rescission of that contract and such rescission cannot be granted because the lack of conformity in those goods is minor, even though that consumer is not entitled to refine his initial application or to bring a fresh action to that end.”

3.          OBLIGATIONS OF MEMBER STATES

ENFORCEMENT: The MSs ensure that there are adequate and effective means to enforce the Directive, and it is acceptable for MSs to give organisations the right to take legal action in the courts to enforce national provisions transposing the Directive.  Such bodies include:

“a) public bodies or their representatives

b) consumer organisations having a legitimate interest in protecting consumers

c) professional organisations having a legitimate interest in acting.”

REPORTING OBLIGATIONS: According to Article 20 of the Directive, the MSs:

«…take appropriate measures to ensure that information on the rights of consumers under this Directive, and on the means to enforce those rights, are available to consumers»

4.          OTHER RELEVANT PROVISIONS

This Directive repealed Directive 1999/44/EC on 1 January 2022 and amended Regulation (EU) 2017/2394 and Directive 2009/22/EC.

The Directive entered into force on its publication in the Official Journal of the European Union and will be reviewed by the Commission on 12 June 2024.

Σχετικά Άρθρα

ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED

Regulation 524/2013 on online dispute resolution for consumer disputes and amending 

By Evripides Hadjinestoros

1. INTRODUCTION

Regulation 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC («Regulation») aims to promote Online dispute resolution («ODR») through the creation of a European Online Dispute Resolution platform («ODR platform»). This Regulation entered into force on the 9^th of January 2016.

The said platform, which the Regulation creates, aims to facilitate the independent, impartial, transparent, effective, fast and low-cost out-of-court solution and fair out-of-court resolution of disputes between consumers and traders online., particularly with regard to cross-border markets.  The platform launched on February 16.

WHAT IS ONLINE DISPUTE RESOLUTION? Generally, Online Dispute Resolution («ODR»), is the resolution of disputes using technology. The use of ODR, results from the rapid development of both technology and Alternative Dispute Resolution («ADR»). In fact, it has been said that ODR is the future of dispute resolution.

ADVANTAGES: The advantages of Online Dispute Resolution are many. Among these are its low cost, its accessibility and its effectiveness, compared to face-to-face ADR.  Since consumers who use Online Dispute Resolution, do business online, this prompts traders to settle their disputes with them – as this avoids bad online reviews. Because consumers are making more and more purchases online, while at the same time more and more traders are selling their products online, the use of ODR enhances consumer confidence in online transactions. Confidence in ODR is also achieved by easy and low-cost access to dispute resolution systems. As reported by Donnelly and White:

“The simple provision of an algorithmically derived standard complaint format can facilitate the negotiation process by removing unnecessary and inflammatory information, thus allowing for more focused engagement”

2. SCOPE

Based on article 2, the Regulation applies to the out-of-court resolution of disputes arising from disputes related to online sales contracts or service contracts  between a consumer residing in the EU and a trader established in the EU where the dispute is handled by an ADR Entity. The Regulation applies to domestic online transactions as well as cross-border transactions, as this ensures equality in the conditions of competition in online commerce in the single market.

The Regulation and Directive 2013/11/EU should be read together since the Regulation complements the Directive to the extent that differences arise from online contracts. However, it does not exclude the use of the ODR platform in complaints which come from a trader against a consumer to the extent that the legislation of a Member State (“MS”) allows this. In such a case, the MSs inform the Commission about the ADR Entities that deal with trader against consumer disputes. Although this provision is of limited use, situations in which a trader may have a claim against a consumer include claims for payment of a price due for products the latter purchased or even cases involving defamation for a false negative consumer review against a trader.

WHAT IS AN ONLINE SALES CONTRACT: According to the Regulation, an online sales contract is a contract for the sale of goods or the provision of services in which the trader or intermediary offers goods or services through a website or other online means and the consumer orders those goods or services through that website or other online means. For example, contracts entered into via an electronic device (e.g. mobile phone) are considered online sales contracts.

As with Directive 2013/11/EU, the Regulation does not affect the application of Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain matters of mediation in civil and commercial matters.

Nor is the Regulation preventing the operation of existing ADR Entities within the Union or their ability to deal with online disputes that have been submitted directly to them.

3. ADR Platform

The use of the words ODR platform is somewhat misleading since the platform is essentially a case management tool rather than a comprehensive dispute resolution process. The process is left to the ADR Entities who willingly use the platform in accordance with their existing procedural regulations. Precisely because of the operation of the platform as a case management tool, as well as the freedom of choice of the use of the platform by the ADR Entities, the latter can use the platform to manage all their cases – whether they concern online purchases or not.

CREATION OF THE ODR PLATFORM: Article 5 of the Regulation provides for the creation and development of the ODR platform at EU level in which consumers resolve disputes with traders through an ADR Entity, and in which information is provided about ADR Entities.

This platform is provided through the “Your Europe” portal and has already been developed by the Commission which is responsible for its operation, maintenance and funding, as well as for the security of the data resulting from it. According to the Regulation, the platform must be easy to use, accessible and useful for everyone, including vulnerable users. It also ensures respect for privacy.

WHAT IS THE ODR PLATFORM? The platform is an interactive website listing ADR Entities and offering free access to consumers and traders to resolve their disputes by providing the following features:

CONTACT POINTS FOR ODR: Each MS designates an ODR contact point which can be the European Consumer Center of the MS or another consumer association or other entity. The contact points host two ODR consultants.

These contact points are entrusted with various tasks which consist of facilitating communication between the parties and the ADR Entity as well as submitting to the Commission an activity report every two years. It is noted that the said duties do not need to be performed when the parties have their habitual residence in the same MS unless the MSs decides otherwise. Contact points work together to carry out their tasks through a network of ADR contact points established by the Commission.

3.1.              Complaint

The submission of a complaint is governed by article 8 of the Regulation, while the processing and transmission of the complaint is governed by article 9.

Article 8 states that, in order to submit a complaint to the ODR platform, the complainant (i.e. either the consumer, or – in case the MS chooses  – the trader) completes the online complaint form which contains information to identify the competent ADR Entity. The information is contained in the Annex to the Regulation and includes the name and address of the consumer and the trader, the language, the price of the products purchased, the type and description of the order and some other information. The complaint may also contain supporting documents  such as invoices, receipts, photos, etc.

By completing the complaint form, the consumer has the possibility to negotiate directly with the trader before being informed of the complaint before the complaint is made known to the ADR Entity.

INFORMATION COMMUNICATED TO THE TRADER: Where the above selection is not made, as soon as the completed complaint form is received, the ODR platform forwards the complaint to the complainant in an online form along with specific information regarding the right to choose/use an ADR Entity, the ADR Entities that may handle the dispute, inviting the trader to state within 10 days whether he is committed or required to use a specific ADR Entity for resolving disputes with consumers or, where he is not committed, whether he is willing to use such an entity. The information also includes the contact points of the MS.

INFORMATION COMMUNICATED TO THE CONSUMER: Upon receipt of the above information and the trader’s response, the ODR platform communicates to the complainant information regarding the right to choose/use an ADR Entity as well as the entities indicated by the trader that he is willing to use (if the complainant is a consumer) and it invites him/her to agree on a specific ADR Entity within 10 calendar days. The information also includes the contact points of the MS.

All notifications contain the following information regarding the characteristics of the ADR Entity:

INFORMATION COMMUNICATED TO THE ADR ENTITY: The ODR platform automatically forwards the complaint to the ADR Entity that the parties have agreed to use according to the above procedure.

3.2.              Dispute Resolution

FAILURE TO START THE PROCESS: If the parties are unable to agree within 30 calendar days of the submission of the complaint form regarding the ADR Entity of their choice, then the complaint is not processed further, and the complainant is informed of the opportunity to contact an ODR Adviser. The same happens if the ADR Entity refuses to deal with the dispute. As we shall see below, in the year 2020, 89% of the cases referred, the trader did not respond within the 30-calendar day period, while in 6% of the cases, it refused to participate within the above time frame.

COMMENCEMENT OF THE PROCEDURE: Once the ADR Entity receives the complaint, it informs the parties whether it agrees or refuses to deal with the particular dispute (always in accordance with Directive 2013/11/EU) and informs the parties of its procedural regulations and the costs of the chosen dispute resolution process.

DISPUTE RESOLUTION: According to article 10 of the Regulation, the ADR Entity that agreed to handle the dispute should:

PRESENCE OF THE PARTIES: As mentioned in the above article, the process takes place online through the platform and the procedural rules for resolving the dispute of the selected ADR Entity are followed. The only case in which the procedure may take place in the physical presence of the parties is (a) if the procedural rules of the ADR Entity allow it and (b) the parties agree to it.

3.3.              Personal Data

The Regulation places particular emphasis on the protection of personal data. First of all, it should be noted that, in relation to the electronic complaint form, only information that is accurate, relevant, and not excessive in relation to the purposes for which it is collected is processed. A complaint that is not fully completed will not be processed, and in such case the complainant is informed that his complaint cannot be further processed, unless the missing information is provided.

According to article 11 of the Regulation, the Commission takes the necessary measures to create and maintain an electronic database in which it stores the information processed.

Access to the necessary information constituting the dispute is limited to the ADR Entity and – to the extent necessary for the fulfillment of their duties as well as for platform maintenance purposes – the ODR contact points and the Commission.

The data retention period in the ODR platform is 6 months from the date of completion of the dispute investigation process.

RESPONSIBLE FOR PROCESSING: ODR consultants and ADR Entities are considered data controllers for their own activities.

DATA SECURITY: ODR contact points are subject to the rules of professional secrecy or other equivalent confidentiality obligations set out in the legislation of the relevant MS. The Commission, for its part, must take appropriate technical and organizational security measures.

3.4.              Statistical Data

According to the Commission’s report regarding the operation of the ODR platform in the year 2020, it is important to mention the following in relation to the use of the ODR platform:

• A total of 17,641 fully completed complaints were registered.
• 50% of complaints registered are cross-border.
• In 95% of complaints, the trader ignored the complaint or refused to resolve it (89% of complaints were ignored) while 4% of complaints were withdrawn by consumers.
• In fact, 1% of complaints ended up with an ADR Entity.
• Most complaints concerned airlines – most likely due to the impact of Covid-19 on flight schedules (about a quarter of the total number of complaints) while the second largest area of ​​complaints concerned motor vehicle spare parts (6.38% of complaints).

Although over time there is an increase in complaints that are filed and resolved on the ODR platform, from the above data it appears that Alternative Dispute Resolution does not end up with the ADR Entities. This is not necessarily negative, given that complaints are resolved before reaching the ADR Entities. Unfortunately, the above report does not include cases where the trader and the consumer have reached a compromise, e.g. outside the ADR platform.

Given the voluntary use of the ODR platform by traders as well as consumers, it seems that the information obligation provided by the Regulation (but also by Directive 2013/11/EU) act as push mechanisms for traders (directly through informing them and indirectly through the information consumers receive) to use ODR.

4. Trader’s Obligations

Article 14 provides for the obligation of traders who are established in the EU and conclude contracts for online sales or services as well as in online markets established in the union, to provide on their websites the link to the ODR platform as well as their email. The purpose of this provision is to make the ODR platform widely known to consumers.

“Online marketplace” is defined as a service provider providing information society services that enables traders to make their products and services available to consumers  and therefore to electronically enter into sales and service contracts with each other through the online market website.

CASES WHERE TRADERS ARE REQUIRED TO USE ADR ENTITIES: In case traders are bound or obliged to use ADR Entities, this information also includes the possibility of using the ODR platform. Where prior to the purchase there was an offer from the trader via e-mail, all such information should be included in the e-mail. They should also be included in the general terms and conditions applicable to the contract of online sales or services.

The information on the basis of article 14 of the Regulation, is without prejudice to the duties of information of the Trader to inform about the ADR Entities covered by Directive 2013/11/EU, and is also without prejudice to the duties of information regarding the possibility of recourse by a consumer in an out-of-court complaint mechanism to which the trader is subject, and for the relevant methods of access to those referred to in Directive 2011/83/EU.

5. Role of Member States

According to the Regulation, the MSs ensure that the ADR Entities, the Network of European Consumer Centers as well as the competent authorities, provide a link to the ODR platform. Also, the MSs encourage consumer associations and business associations to provide a link to the ODR platform.

Σχετικά Άρθρα