A ruling orders Cofidis to pay costs as a deterrent measure despite partially upholding its appeal

The Provincial Court of Toledo has handed down a novel and unprecedented ruling in the context of litigation against financial institutions, ordering Cofidis to pay the legal costs of the appeal it filed in the second instance, despite the fact that the judges partially upheld its claim.

Contract nullity due to lack of transparency

The case, led by Abogados Legalsha, focused on the invalidity of an interest clause included in a consumer credit agreement. Although the court did not uphold usury as the main claim in the lawsuit, it did uphold the consumer’s subsidiary claim, declaring the contract itself invalid due to lack of transparency.

A decision with an exemplary effect

What is truly novel is that, despite this being a partial ruling in favour of the financial institution, the Provincial Court has ordered Cofidis to pay the costs of the first and second instances as a deterrent, something that does not occur in the judicial practice of this type of ruling.

According to the Fifth Legal Ground of the ruling, this decision ‘responds to the need to deter financial institutions from using legal remedies as tools to delay proceedings and wear down consumers’. The court expressly states that ‘this ruling seeks to prevent financial institutions from using appeals as a tool to pressure or wear down consumers, hindering their real and effective access to justice’. The court thus argues its decision by emphasising that, although the claim was not upheld in its entirety, the consumer obtained a substantial victory by achieving nullity due to lack of transparency, so that the award of costs is not only appropriate but also necessary to avoid a ‘reverse deterrent effect’ that could discourage future legitimate claims.

Warning to financial institutions

Abogados Legalsha points out that the fact that a financial institution is ordered to pay costs, even if its claim is only partially upheld, ‘is a clear warning to financial institutions to stop this type of abusive strategy’. ‘This imposition of costs on Cofidis is a warning to financial institutions that use delaying tactics to hinder judicial control of abusive clauses,’ says Rebin Shamamy, CEO of Abogados Legalsha, who also stresses that the ruling ‘sets an important precedent by strengthening consumers’ access to justice and marks a new criterion in terms of legal costs’.

Abogados Legalsha is a legaltech corporation specialising in banking law and focused on consumer protection. It has a team of more than 100 professionals, including lawyers, solicitors, economists and experts, as well as an extensive network of collaborators throughout Spain. The company operates throughout Spain and is currently responsible for the legal management of more than 80,000 court proceedings.