Gelvora (Consumer protection Consumer protection - Debt collection agency - Consumer credit : Judgment) [2017] EUECJ C-357/16 (20 July 2017)

Judgment This request for a preliminary ruling concerns the interpretation of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC and Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘the Unfair Commercial Practices Directive’) (OJ 2005 L 149, p. 22). The request has been made in proceedings between UAB ‘Gelvora’ and the Valstybinė vartotojų teisių apsaugos tarnyba (State Consumer Rights Protection Authority, ‘the Authority’) concerning the latter’s decision to sanction that company for having engaged in unfair commercial practices. Legal context EU law Recital 13 of the Unfair Commercial Practices Directive states: ‘In order to achieve the Community’s objectives through the removal of internal market barriers, it is necessary to replace Member States’ existing, divergent general clauses and legal principles. The single, common general prohibition established by this Directive therefore covers unfair commercial practices distorting consumers’ economic behaviour. In order to support consumer confidence the general prohibition should apply equally to unfair commercial practices which occur outside any contractual relationship between a trader and a consumer or following the conclusion of a contract and during its execution. The general prohibition is elaborated by rules on the two types of commercial practices which are by far the most common, namely misleading commercial practices and aggressive commercial practices.’ Article 2 of that directive provides: ‘For the purposes of this Directive, the following definitions shall apply: ... (c) “product” means any goods or service including immovable property, rights and obligations; (d) “business-to-consumer commercial practices” (hereinafter also referred to as commercial practices) means any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product to consumers; ...’ Article 3(1) of Directive 2005/29 is worded as follows: ‘1. This Directive shall apply to unfair business-to-consumer commercial practices, as laid down in Article 5, before, during and after a commercial transaction in relation to a product.’ Lithuanian law The Lietuvos Respublikos nesąžiningos komercinės veiklos vartotojams draudimo įstatymas (Law on the prohibition of unfair commercial practices in relation to consumers) of 21 December 2007 transposes the Unfair Commercial Practices Directive into national law. Article 2(8) of that law defines the concept of ‘product’. Article 3(1) and 3(2)(1) lay down a general prohibition on unfair commercial practices and, furthermore, the circumstances in which a commercial practice is considered to be unfair. According to Article 5(1)(4) of that law, misleading action consists in providing false or misleading information to the average consumer as regards price, the method of calculation by which the price is arrived at, or the existence of a specific price advantage. Article 6(1)(1) of the Law on the prohibition of unfair commercial practices in relation to consumers provides that any action, which leads or is likely to lead the consumer to make a commercial decision which he would not have otherwise taken, constitutes a misleading omission if it omits substantial information that the consumer needs in order to make an informed decision. Article 6(3)(3) of that Law provides that information on prices is essential in the context of an invitation to purchase. The dispute in the main proceedings and the questions referred for a preliminary ruling Gelvora, a private debt collection agency, entered into contracts with banks for the assignment of debts, pursuant to which it acquired claims derived from consumer credit agreements concluded between consumers and the banks assigning the debt. On the basis of those contracts of assignment, Gelvora brought actions for recovery against the debtors, in some cases in parallel with enforced recovery proceedings carried out by bailiffs on the basis of final judicial decisions. In that context, four consumers lodged an appeal with the Authority against Gelvora. The Authority found that Gelvora had infringed the national provisions relating to the prohibition on commercial practices deemed unfair. The Authority held that Gelvora’s commercial practices infringed Article 3(1) of the Law on the prohibition of unfair commercial practices in relation to consumers and imposed on it a fine of EUR 3 475.44. Gelvora brought an action before the Vilniaus apygardos administracinis teismas (Regional Administrative Court, Vilnius, Lithuania) for the annulment of the Authority’s decision. By a judgment of 18 May 2015, that court dismissed Gelvora’s appeal as unfounded. It found in particular that the relationship between the debtors and Gelvora was a consumer relationship and held that the company was a trader providing a product or service to consumers, namely debt management. Gelvora appealed against that decision to the referring court, the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court, Lithuania), which considered that the outcome of the dispute submitted to it depended on the interpretation of the Unfair Commercial Practices Directive. In those circumstances, the Lietuvos vyriausiasis administracinis teismas (the Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Does the legal relationship between a company that has acquired the right to a debt under an assignment of claim agreement and a natural person whose indebtedness arose under a consumer credit agreement, where the company carries out acts of debt recovery, fall within the scope of [the Unfair Commercial Practices Directive]? 2. If the answer to the first question is in the affirmative, does the term ‘product’ used in Article 2(c) of the [Unfair Commercial Practices Directive] cover acts performed in exercising the right to the debt acquired under the assignment of claim agreement in the context of debt recovery from a natural person whose indebtedness arose under a consumer credit agreement entered into with the original creditor? 3. Does the legal relationship between a company that has acquired the right to a debt under an assignment of claim agreement and a natural person whose indebtedness arose under a consumer credit agreement and has already been established by a final judicial decision and passed to the bailiff for enforcement, where the company is carrying out parallel acts of debt recovery, fall within the scope of the [Unfair Commercial Practices Directive]? 4. If the answer to the third question is in the affirmative, does the term ‘product’ used in Article 2(c) of the [Unfair Commercial Practices Directive] cover acts performed in exercising the right to the debt acquired under the assignment of claim agreement in the context of debt recovery from a natural person whose indebtedness arose under a consumer credit agreement entered into with the original creditor and has been established by a final judicial decision and passed to the bailiff for enforcement?’ Consideration of the questions referred By its four questions, which it is appropriate to examine together, the referring court essentially asks whether the legal relationship between a private debt collection agency and a debtor, who has defaulted under a consumer credit agreement and whose debt has been assigned to that agency, falls within the scope of the Unfair Commercial Practices Directive and, if so, whether the practices which that company engages in in order to recover its debt fall within the concept of ‘product’ within the meaning of Article 2(c) of that directive. The referring court then asks whether the answer is the same even if the existence of the debt has been confirmed by a court decision and the decision has been passed to a bailiff for enforcement. As regards, first of all, the question whether a debt collection activity is liable to fall within the scope of the Unfair Commercial Practices Directive, it should be borne in mind, first, that Article 2(d) of the Unfair Commercial Practices Directive defines, using a particularly broad formulation, the concept of ‘commercial practices’ as ‘any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product to consumers’ (judgment of 19 September 2013, CHS Tour Services , C‑435/11, EU:C:2013:574, paragraph 27). Moreover, under Article 3(1) of the Unfair Commercial Practices Directive, read in the light of Recital 13 thereof, that directive applies to unfair commercial practices in which an undertaking engages, even outside any contractual relationship, either before or after the conclusion of a contract, or following the conclusion of a contract or during the performance thereof. Consequently, the words ‘directly connected with the sale of a product’ cover any measure taken in relation not only to the conclusion of a contract but also to its performance, and in particular the measures taken in order to obtain payment for the product. In the present case, it is apparent from the order for reference that the claims assigned to Gelvora originate in the supply of a service, namely the provision of credit, the consideration for which consists in the repayment of the credit in instalments to which interest at a rate previously agreed is added. Consequently, debt recovery activities, such as those at issue in the main proceedings, may be regarded as a ‘product’ within the meaning of Article 2(c) of the Unfair Commercial Practices Directive. That finding is not called into question by the fact, referred to in the first and third questions referred for a preliminary ruling, that the recovery measures are taken by a legal person which has acquired a claim against a consumer as a result of the assignment of that claim by the original lender and which is acting as a trader in relation to that consumer. Although a debt collection agency, such as Gelvora, does not provide the consumer with a consumer credit service as such, the fact remains that the activity in which it engages, namely the recovery of debts which have been assigned to it, falls under the concept of ‘commercial practice’ which may be unfair, within the meaning of the Unfair Commercial Practices Directive, since the measures which it adopts are liable to influence the consumer’s decision in respect of the payment of the product. In that context, the Commission, in the document entitled ‘Guidance on the implementation/application of Directive 2005/29/EC on unfair commercial practices’ of 25 May 2016 [SWD (2016) 163 final], indicates that debt collection activities should be considered as after-sales commercial practices. Furthermore, it is clear from the examples cited by the Commission in that document that a number of national courts take the view that the activities of collection agencies fall within the scope of that directive. First, the conditions in which a debt owed by a consumer may be recovered may be so important as to decisively influence the consumer’s decision to take out a loan, particularly where the measures taken to recover the debt take the form of those at issue in the main proceedings. Second, if the application of the Unfair Commercial Practices Directive were excluded in respect of credit repayment transactions in the event of the assignment of a debt, that could call into question the effectiveness of the protection afforded to consumers by that directive, since professionals could be tempted to separate the recovery phase, in order not to be subject to the protective provisions of that directive. For that same reason, finally, the fact that the obligation to pay the debt was confirmed by a court decision and that the debt collection agency, in parallel to those enforcement proceedings, undertook other unilateral recovery measures, has no effect on the reply given. Aside from the fact that initiating such measures in parallel to official enforcement proceedings through a bailiff is liable to mislead the debtor as to the nature of the procedure which he faces, the effectiveness of the protection provided to the consumer by the Unfair Commercial Practices Directive requires that the trader, which decided to act unilaterally in order to recover the debts, be subject to the provisions of that directive in respect of the measures which it adopts unilaterally, in parallel to enforcement proceedings. In the light of the foregoing, the Unfair Commercial Practices Directive must be interpreted as meaning that the legal relationship between a debt collection agency and a debtor, who has defaulted under a consumer credit agreement and whose debt has been assigned to that agency, falls within the material scope of that directive. The practices in which that agency engages in order to recover that debt fall within the concept of ‘product’ within the meaning of Article 2(c) of the directive. In that regard, the fact that the existence of the debt was confirmed by a court decision, and that that decision was passed to a bailiff for enforcement, is without consequence. Costs Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Tenth Chamber) hereby rules: Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) must be interpreted as meaning that the legal relationship between a debt collection agency and the debtor, who has defaulted under a consumer credit agreement and whose debt has been assigned to that agency, falls within the material scope of the directive. The practices in which that agency engages in order to recover that debt fall within the concept of ‘product’ within the meaning of Article 2(c) of that directive. In that regard, the fact that the existence of the debt was confirmed by a court decision, and that that decision was passed to a bailiff for enforcement, is without consequence. [Signatures] * Language of the case: Lithuanian. © European Union The source of this judgment is the Europa web site. The information on this site is subject to a information found here: Important legal notice . This electronic version is not authentic and is subject to amendment. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII