In June 2025, the Court of Justice of the European Union (CJEU) delivered important rulings clarifying the application of the EU Unfair Contract Terms Directive (UCTD), which protects consumers from unfair standard contract terms that have not been individually negotiated. The UCTD ensures such terms are transparent, clear, and balanced; unfair terms are not binding on consumers and may expose businesses to enforcement actions.

This blog post highlights four significant cases decided in June 2025. These cases involve preliminary references from national courts to the CJEU to clarify whether national laws are aligned with EU law.

• Case C‑749/23 (innogy Energie) – decided on June 5, 2025 – on whether a fixed-rate electricity contract may impose a flat-rate penalty on a consumer for early termination, regardless of actual loss, under the UCTD.

Background: the electricity supplier sought a flat-rate penalty for early termination of a fixed-term contract due to non-payment. The penalty clause was part of a pre-formulated electronic contract under “Other terms.” The Czech court questioned its fairness and transparency under the UCTD.

Judgment: the CJEU ruled that a flat-rate penalty applied without proof of actual loss may be unfair under the UCTD. The clause must also be transparent enough for an average consumer to understand its nature and consequences. This assessment depends on the contract’s structure and the clause’s location, as well as the circumstances of the contract’s electronic conclusion, including the information provided by the supplier. It is for the national court to determine whether these conditions are satisfied.

• Case C‑396/24 (Lubreczlik) – decided on June 19, 2025 – on whether a consumer can be required to repay the full loan amount under a void mortgage agreement containing unfair terms, regardless of prior repayments, and whether such a repayment order must be declared immediately enforceable.

Background: the case involved mortgage contracts, which were declared void due to unfair terms. Under Polish case law, each party may reclaim the full amount paid—meaning banks can demand full loan repayment even if the consumer has already made substantial repayments. Additionally, Polish procedural law requires that if a consumer accepts the bank’s claim, the judgment must be declared immediately enforceable.

Judgment: the CJEU held that such rules are incompatible with the UCTD. Requiring consumers to repay the full nominal loan without accounting for repayments made undermines the UCTD’s deterrent effect and may discourage consumers from challenging unfair terms. The CJEU also ruled that mandatory immediate enforceability of such repayment orders, without judicial safeguards to protect consumers from serious financial harm, violates the UCTD.

• Case C‑280/24 (Malicník) – decided on June 20, 2025 – on whether a fixed “administrative fee” in a consumer credit agreement meets the UCTD’s transparency and fairness requirements.

Background: the consumer credit agreement charged a one-off administrative fee labeled only by name and amount, without explaining the services covered. The Slovak court questioned if this met the UCTD’s transparency and fairness standards.

Judgment: the CJEU held that merely stating the label and amount of a fee is not enough to satisfy the transparency requirements of the UCTD. Consumers must be able to understand the clause’s purpose and its economic consequences. The Court further ruled that such an administrative fee clause must correspond to actual services or expenses reasonably related to the lender’s necessary activities for concluding the contract. It is for the national court to assess, in light of all circumstances, whether the clause was transparent and fair.

• Case C‑351/23 (GR REAL) – decided on June 24, 2025 – on whether a Member State law may prevent a consumer from requesting the suspension of an extrajudicial auction based on the unfairness of an acceleration clause included in a housing credit agreement.

Background: consumers sought to suspend an extrajudicial auction of their home, arguing the acceleration clause was unfair. Despite ongoing proceedings, the auction proceeded and the property was sold to a third party, who later sought eviction. The Slovak court questioned whether the law’s limited grounds for annulment and lack of clear provisions for suspending unfair terms were contrary to the UCTD.

Judgment: the CJEU held that national law may not undermine the protections granted by the UCTD by allowing enforcement despite pending review of unfair terms. Consumers must be able to challenge the enforcement of a clause deemed unfair, even after ownership transfer, if timely legal action and evidence of unfairness exist.

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Covington & Burling regularly advises companies on all aspects of EU consumer protection law, as well as intersections with privacy, cybersecurity, and product safety laws. We closely monitor the decisions of the Court of Justice of the EU. We are happy to assist you with any inquiries related to compliance with EU consumer protection law.

This blog post was written with the contributions of Ryoko Matsumoto.