CJEU: Unfair Commercial Practices Directive applies to debt collection

In the CJEU’s recent judgment of UAB ‘Gelvora’ v Valstybinė vartotojų teisių apsaugos tarnyba (C-357/16), it held that the Unfair Commercial Practices Directive (“the UCPD”) applied to the services provided by a debt collection agency.

Gelvora is a private debt collection agency operating in Lithuania. It takes assignments of debts from banks, which it then pursues. The CJEU held that both the original bank’s provision of credit and Gelvora’s debt recovery services were “products” under art 2(c) of the UCPD [23]. In order for debt collection services to qualify as a “commercial practice”, there was no need for there to be a contractual relationship between the trader (Gelvora) and the consumer [20] (although on these facts there was one, given that Gelvora was an assignee). However, there was a need for the practice to be “directly connected with the sale of a product”. This phrase was capable of covering actions undertaken to obtain payment for the product [21]. The scope of debt collection activities was liable to influence a consumer’s decision as to the payment for the product, including the original decision whether to enter the loan [25] and [27].

It is irrelevant that the bank provided the original service (credit), as the debt collection activities form a part of after-sales commercial practices, that may be facilitated by third parties [26].

The CJEU also considers a purposive interpretation of the UPCD: to exclude debt collection practices from the scope of the Directive could encourage service providers to separate the recovery of payment phase from the service of providing credit, resulting in reduced consumer protection [28].