Introduction

Financial services have become increasingly important in the EU. While such services are essential for the everyday life of EU citizens and for the EU economy at large, some of them entail very high risks which may particularly affect the vulnerable in financial transactions. Thus, for example, the provision of investment services by the bank may lead to huge financial losses beyond the client's ability to pay. By the same token, the provision of a business loan for one family member on the condition that another family member stand as a surety for the whole debt may result in financial ruin for the latter. The inequality of bargaining power and information asymmetry between the parties, coupled with huge risks involved in many financial transactions, give rise to the question of how and to what extent the vulnerable in such transactions must be protected.

Private laws of all European legal systems have developed concepts which aim to protect the weaker party against unconscionable bargains. Concepts such as good morals (gute Sitten) in German law, good faith (redelijkheid en billijkheid) and mistake (dwaling) in Dutch law or undue influence and unconscionability in English law may in certain circumstances relieve the weaker party from his or her onerous contractual obligations. There is a general agreement that the vulnerable should be protected against unconscionable transactions in private law.