Consumer Rights Act 2015 vs EU DIRECTIVE 93/13/EEC

Question

I am interested in the interplay of the EU directive 93/13/EEC and the Consumer Rights Act 2015 in the UK.

Specifically the Consumer Rights Act has an exclusion from assessment of fairness where the clause specifies the main subject matter of the contract. But this is not mentioned in the directive so seems to severely limit the applicability of the directive.

I am interested because we have a mortgage that changed from a fixed rate to a tracker but the tracker has a floor preventing the rate from falling below a certain level. The floor is clearly outlined in the contract for the mortgage, however, we were unaware of it when we signed and actually assumed we have been repaying at a lesser rate than what we were.

I would like to argue that the floor introduced a significant unfair imbalance as it protected the lender from a reduction in the base rate without providing us with protection from raising rates.

It seems many Spanish mortgages with similar "floor" contracts have had the floor nullified for similar reasons and they seem to be referring to the EU directive.

I have also come across a EU Court of Justice ruling regarding the directive which states:

the concept of ‘significant imbalance’ to the detriment of the consumer must be assessed in the light of an analysis of the rules of national law applicable in the absence of any agreement between the parties, in order to determine whether, and if so to what extent, the contract places the consumer in a less favourable legal situation than that provided for by the national law in force. To that end, an assessment of the legal situation of that consumer having regard to the means at his disposal, under national law, to prevent continued use of unfair terms, should also be carried out;

in order to assess whether the imbalance arises ‘contrary to the requirement of good faith’, it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.

That seems to suggest that a court would need to consider if I would have accepted the terms if I had been able to negotiate them with assistance of professional advice which would have been unlikely due to the one sided nature of the clause.

UK law would seem to make the floor legally valid regardless of fairness because the floor was a "main part" of the agreement which means it is excluded from the fairness test.

I am a bit out of my depth and definitely do not understand how an EU directive / ruling could affect my argument. However, is it the case that the EU directive / EU Court ruling can override the UK law?

I would greatly appreciate any advice as to how best to formulate my argument with my lender or if I really don't have a leg to stand on from a legal perspective.

Answer 1

This is an outsiders perspective.

Last question first: EU directives do not override UK law. Each member state of the EU is a sovereign nation that has agreed to implement EU directives into their domestic law. It is the domestic law that is primary, however, the EU directive may serve to clarify ambiguity.

As to the particular clause; the relevant clause in the Act is 64(1)(b) - not 64(1)(a):

the assessment is of the appropriateness of the price payable under the contract by comparison with the goods, digital content or services supplied under it.

The specification of the interest rate is clearly to do with "the appropriateness of the price payable by comparison with the ... services supplied."

This would be exempt from the fairness test providing that it was both transparent and prominent. The transparency is probably not in doubt; the question is: is it prominent?

A term is prominent for the purposes of this section if it is brought to the consumer’s attention in such a way that an average consumer would be aware of the term.

Well, I don't have a copy of your loan document but if this was part of the section on how the interest rate is to be determined then an "average consumer" would probably have looked at this section. The fact that you have signed it would typically be taken by a court as pretty strong evidence that you both read and understood the term.

So, on balance, it would appear that this term is not subject to the fairness test. Either, renegotiate this term or find another lender.

Answer 2

EU directives tell the member countries what kinds of laws they should introduce, or how they should change their existing laws. However, what counts for you in the UK is the actual UK law. EU directives are not law.

You have the right to feel unhappy if the UK doesn't implement a EU directive as directed but nobody can force the UK to implement these directives or to implement them completely.