Cunning Thesis Substitution Exploited Consumer Protection

Written by: Dr. Stjepan Lović, attorney, Grubišić & Lović & Lalić Law Firm

With the enactment of the Consumer Protection Act (ZZP) in 2023, a legal basis has been introduced into the legal system of the Republic of Croatia that ensures a higher level of protection for consumer rights and clearly prescribes instruments for the protection and realization of violated rights. It defines that a consumer is any natural person who enters into a legal transaction or acts on the market outside their commercial, business, craft, or professional activities. It also defines the concept of unfair terms in consumer contracts and explicitly lists provisions that can be considered unfair. The higher level of consumer rights protection prescribed by this law, which is not characteristic of other laws, is achieved by the court monitoring the validity of the provisions of contracts that consumers enter into with other parties ex officio, and not only upon the consumer’s objection.

However, there is a noticeable trend that natural persons in the role of debtors/defendants in a large number of court proceedings invoke this law claiming to be consumers and seek protection from the courts that, according to the ZZP, belongs only to consumers. It is clear that such objections are raised solely for the purpose of delaying the proceedings, but also that courts, without prior determination of whether such persons can even seek protection under this law, allow the implementation of many evidentiary proposals, which ultimately harms creditors/plaintiffs.

Difficult Position of Creditors

This trend is particularly pronounced in proceedings for the collection of claims based on loan agreements or other similar contracts in which natural persons are the loan beneficiaries or signatories of the contracts in the role of guarantors, and the loan amount has been used for some business purpose, mainly for residential construction. These are often solemnized contracts that mean enforcement documents, which means that creditors, after the due date of the claim, are authorized to initiate enforcement proceedings for the collection of their claims in accordance with the conditions of these contracts.

Since the amount of the claim is generally secured by a mortgage on the property for which the debtor received funds for construction, creditors initiate enforcement proceedings in which the sale of that property at a public auction begins for the collection of the due claim. Even then, to complicate the collection of the owed amount, debtors file lawsuits to determine the nullity of that loan agreement or similar contract, seeking protection from the court based on the ZZP and a postponement of the sale of the property at auction until a final decision is made in the court proceedings. And this can take several years. Such lawsuits are often a means of pressure on creditors to abandon part of their claims or to reach a new agreement with the debtor, in return for which the debtor will withdraw their lawsuit against the creditor. Simultaneously with the filing of the lawsuit, debtors request from the relevant land registry department the registration of the dispute on the property, which causes potential new buyers of the property to withdraw from the purchase, further complicating creditors’ collection of their undisputed claims.

EU Court: Who is a Consumer

To expedite decision-making in cases where plaintiffs seek protection under the provisions of the ZZP, it is essential for the courts to first determine whether these plaintiffs can even be considered consumers. For this reason, it is necessary to refer to the decision of the Court of Justice of the European Union No. C-630/17 of February 14, 2019, in the case of Milivojević v. Raiffeisen St. Stefan-Jagerberg-Wolfsberg eG, which states that the term ‘consumer’ should be interpreted narrowly, taking into account the position of that person in a specific contract concerning its nature and purpose, and not their subjective position, whereby the same person can be considered a consumer in certain transactions and a business entity in others.

Therefore, only contracts concluded outside any professional activity or purpose and independently of it, with the sole aim of satisfying individual private consumer needs, are covered by the special regulation provided in the area of consumer protection as a party considered weaker, and such protection is not justified in the case of contracts whose aim is professional activity.

Who Should Be Protected

The abuse of procedural rights that belong only to consumers, without any sanctions for the perpetrators of such actions, is a flaw in the Croatian legal system. No type of court proceedings is immune to such abuses, and the protection of creditors becomes a minor issue. All of this also affects the negative perception of our judiciary, which no reform will be able to improve as long as courts allow prolonged proceedings due to their unfamiliarity with certain matters.

It should be emphasized that only those persons who are considered consumers can seek the protection that belongs to them under the provisions of the ZZP, and only if they have entered into a contract that, in terms of the provisions of the ZZP, falls into the category of consumer contracts. Everything else only increases the damage to creditors and the overload of the courts.