The Court Explained When Interest on an Online Loan Can Be Deemed Unfair and Reduced

The Biliaivka District Court of Odesa Region considered, in simplified civil proceedings, case No. 496/3097/25 regarding a claim by an LLC to recover debt under a consumer credit agreement concluded electronically.

The court established that the credit agreement had been concluded and the borrower had received the loan funds. However, it refused to award the full amount of interest claimed, deeming it disproportionate, and reduced the interest to the equivalent of the principal debt.

Case Essence

The plaintiff petitioned the court for the recovery of debt under agreement No. 459697-KS-001, a loan agreement concluded electronically on 11 February 2023, in accordance with the Law "On Electronic Commerce". The credit agreement was signed with a one-time identifier used as an electronic signature.

Under the terms of the agreement, the borrower was granted UAH 9,000 for 16 weeks, with a fixed interest rate of 2% per day and a loan provision commission of UAH 1,350. The agreement was set to expire on 3 June 2023.

The plaintiff stated that it had fulfilled its contractual obligations by transferring the loan funds to the bank card specified by the borrower during the loan application via their personal account. The issuance of the loan was confirmed by a bank card transaction statement and a letter from the plaintiff’s payment partner, verifying the successful transfer of UAH 9,000.

As of 15 May 2025, due to the borrower’s failure to comply with the contract terms, the lender calculated a total debt of UAH 29,021.08. This consisted of UAH 9,000 principal, UAH 18,671.08 in interest for using the loan, and UAH 1,350 commission.

The plaintiff’s representative requested that the case be heard in their absence and did not object to a default judgment. The defendant, having been duly notified of the date, time, and location of the hearing, failed to appear, submit a response, or provide reasons for their absence. In accordance with Article 280 of the Civil Procedure Code of Ukraine, the court conducted a default hearing.

Court’s Position

After reviewing the case materials, the court determined that the credit agreement had been concluded in compliance with the Law of Ukraine "On Electronic Commerce", utilising the lender’s information and communication system and signed with a one-time identifier as an electronic signature.

The court noted that, according to Articles 11 and 12 of the Law "On Electronic Commerce", an electronic contract signed in the prescribed manner holds the same legal equivalence as a written contract, and each copy of such an electronic document constitutes an original.

Evaluating the submitted evidence, the court deemed both the conclusion of the credit agreement and the borrower’s receipt of the loan funds as proven. The documents provided by the plaintiff were considered proper, admissible, credible, and sufficient to substantiate the claims. Conversely, the defendant provided no evidence of proper fulfilment of their contractual obligations.

However, the court disagreed with the claimed amount of interest for using the loan.

The court stated that, according to paragraph 5 of part three of Article 18 of the Law of Ukraine "On Consumer Protection", unfair contract terms include those that require the consumer to pay a disproportionately large amount of compensation in the event of non-fulfilment of obligations.

In the court’s opinion, a creditor’s ability to levy excessive interest from a consumer distorts the legal nature of interest. Interest, in such cases, ceases to be a means of encouraging proper fulfilment of monetary obligations and instead becomes an unfairly excessive burden for the consumer and a source of unjustified profit for the creditor.

The court also noted that a consumer’s participation in credit relations as the weaker party necessitates special legal protection, which is derived, in particular, from part four of Article 42 of the Constitution of Ukraine. Concurrently, freedom of contract is not absolute and must be exercised in adherence to principles of fairness, good faith, reasonableness, and proportionality.

To support this approach, the court referenced UN General Assembly Resolution No. 39/248 of 9 April 1985, "Guiding Principles for Consumer Protection", the Consumer Protection Charter, EU Directives 2005/29/EC and 2008/48/EC, as well as the Constitutional Court of Ukraine’s decision No. 15-rp/2011 of 10 November 2011, concerning consumer credit rights protection.

Additionally, the court considered the legal position of the Supreme Court as articulated in its ruling of 12 February 2025, in case No. 679/1103/23.

The court emphasised that, in resolving the dispute, it is necessary to rely on the agreed terms of the credit agreement but without permitting situations where the application of specific contractual provisions leads to the accrual of disproportionately large compensation, as this would contravene the principles of the rule of law.

Court Conclusions

Assessing the ratio of the claimed interest to the principal debt, the court observed that the lender had requested UAH 18,671.08 in interest on a loan amount of UAH 9,000, meaning the interest more than doubled the actual funds provided.

The court concluded that, under such circumstances, the consequences of the borrower’s failure to fulfil obligations become demonstrably more advantageous for the creditor than proper contract performance, which contradicts principles of fairness, reasonableness, and proportionality.

Therefore, the court reduced the interest amount to that of the principal debt – UAH 9,000.

As a result, the court partially upheld the claim and ordered the defendant to pay UAH 19,350, comprising UAH 9,000 for the principal debt, UAH 9,000 for interest on the loan, and UAH 1,350 for the loan provision commission. Additionally, a court fee of UAH 1,615.15 was awarded to the plaintiff, proportionate to the satisfied claim amount. The court dismissed the remaining parts of the claim.

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