Unfair terms in a loan agreement: how to spot them and what to claim

What an unfair term is

Romanian Law No. 193/2000 on unfair terms in contracts between traders and consumers protects individuals who sign contracts outside their professional activity, including loan agreements with banks or non-bank lenders. A term may be unfair if it was not individually negotiated with the consumer and if, on its own or together with other provisions, it creates a significant imbalance between the rights and obligations of the parties, to the consumer's detriment and contrary to good faith.

Most loan agreements are standard contracts drafted in advance by the lender. The fact that you signed does not automatically mean that you negotiated each term.

One important detail: terms relating to the main subject matter of the contract or to the price, such as the interest itself, can be assessed for unfairness only if they are not written in plain and intelligible language. That is why, in many disputes, the way the bank explained the term before signing is decisive.

Warning signs

Not every unfavourable term is unfair, and the court examines each provision in the context of the whole contract. Even so, certain types of terms have often been debated in practice:

• fees whose purpose is not clearly explained or which seem to charge twice for the same service;
• the lender's right to change the interest rate unilaterally without clear and verifiable criteria;
• terms that place the entire exchange-rate risk on the consumer without proper information about the consequences;
• disproportionate late-payment penalties;
• unclear wording that an ordinary consumer would struggle to understand.

What you can ask the court for

A consumer can ask the court to declare a specific term unfair and therefore not binding on them. As a rule, the contract continues without that term, provided it can stand without it.

In addition, you can claim repayment of amounts paid under the term, such as fees charged, together with statutory interest, as provided by law. In some cases you may also ask for the repayment schedule to be recalculated. The claim should be supported by the contract, addenda, repayment schedules and bank statements, and an accounting expert report is sometimes needed.

The role of ANPC

The National Authority for Consumer Protection (ANPC) can receive complaints, carry out inspections and impose administrative fines on traders who use unfair terms. The law also allows actions in the collective interest of consumers, seeking changes to standard contracts that are still being performed.

However, a complaint to ANPC is not a substitute for court proceedings. If you want to recover money under your own contract, you will usually need to bring your own claim.

Practical steps if you suspect an unfair term

You do not need to know from the outset whether a term is unfair. It is enough to have your documents in order and not to let too much time pass. A practical sequence usually looks like this:

• gather the loan agreement, all addenda, repayment schedules and bank statements for the whole period;
• note every fee and every interest rate change over time, with the date you noticed it;
• ask the lender in writing for any missing documents and keep proof of the request;
• have the contract reviewed before signing any new addendum or settlement offered by the bank;
• decide with your lawyer whether a formal letter makes sense first or whether to go straight to court.

Limitation periods and practical points

In Romanian court practice, a claim to have a term declared unfair is generally treated as not subject to a limitation period. A claim for repayment of amounts paid, however, is time-barred after a certain period, and the point from which that period starts has been much debated, including in the case law of the Court of Justice of the European Union. For that reason, do not delay having the contract reviewed, especially if you have already repaid the loan or are close to doing so.

Before going to court, it helps to ask the bank in writing for any missing contractual documents and your payment history. A well-reasoned letter can sometimes open the way to an amicable discussion. The information in this article is general, and every contract needs individual analysis.

This article is for information only and does not constitute legal advice. For an analysis of your specific situation, contact a lawyer.