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Early next year, the Court of Justice of the European Union may rule on a foreign currency loan case examining the sustainability of a foreign currency loan agreement that is left without an exchange rate due to the unfair application of the exchange rate gap against the will of the debtor. The Index was informed that the Opinion of the Advocate General, which is not binding on the Court anyway, may be at the beginning of the year, while the ruling is expected for the first half of the year.
Dénes Lázár, a lawyer for the Association for Defense and Financial Education (PITEE), one of the first to initiate lawsuits in the case of creditors in foreign currency, considers that
the decision could significantly disrupt today’s world,
because “banks should return more money to consumers.”
Yet for years, the government’s rhetoric has focused on “bailing out the foreign exchange borrowers.” The forint conversion took place in 2015, many foreign currency borrowers could really breathe a sigh of relief, but according to the Viennese lawyer, the forint conversion was also not a good solution, because many could not sue because the forint law prohibited litigation.
Despite the “bailout”, there are still a few thousand cases pending in Hungary.
“Based on recent judgments, seeing that each court says that a loan contract in foreign currency is void,” says the lawyer, adding that the courts do not decide what the financial consequences of the nullity are, it will be discussed again by the parties. . In the first instance!
The European Court of Justice basically interprets the EU directive in relation to consumer credit contracts, said László Marczingós, the Index’s lawyer in the case (C-932/19). According to him, there could be up to 1 million contract cases in Hungary that could be affected by the CJEU decision.
He considers that the EU is correct in arguing that “the consumer has the right to refuse to intervene in a Member State, which causes him a great disadvantage”. The last thing is that due to the foreign currency credit laws (DH laws) it was not possible to declare the contracts invalid. László Marczingós said that those whose litigation had already been tried at the time for not applying Community law, and therefore deprived of its execution, in this case could initiate new trials of the order of one hundred thousand. He added that, if necessary, the Hungarian state could be liable for damages due to the refusal of the courts to implement EU law.
A ruling by an EU court is like a legislative act, it must be applied literally, it has nothing to explain and interpret
– said László Marczingós.
What treaties will the CJEU decision cover?
If the CJEU were to annul the treaties, the question would arise: who could it affect? Dénes Lázár emphasized that despite the conversion of the forint, these contracts had not been terminated. For example, if someone concluded a foreign currency loan agreement in 2008, which was denominated in forint in 2015 according to the decision of the Hungarian parliament, that agreement was today a forint agreement, but originally started as a foreign currency loan agreement . The decision could also apply to loan agreements that have already been repaid in recent years, unless the statute of limitations has expired, so it has not been five years since the last repayment.
However, here is another twist: when entering the treaties in 2015, which has been the case for 5 years, Dénes Lázár believes that the 5-year limitation period should be contemplated from 2015, that is, until 2010.
“So, if someone had a contract until 2010 and in the end they have returned it, or have returned it since then, the decision will apply to all of them,” the lawyer stressed.
How many contracts can be involved?
According to the data available on the Magyar Nemzeti Bank (MNB) website, according to Dénes Lázár
the court’s decision could affect just over 1.1 million foreign exchange borrowers,
As of at least March 2011, there were 1.1 million foreign exchange borrowers in Hungary and, in counsel’s opinion, the CJEU decision will be applicable to these contracts.
If the contracts are really void, the court would decide so, what will happen then? According to the lawyer, this is also the “big question”, he has occupied the Hungarian courts for almost ten years and has yet to receive an answer. According to Dénes Lázár, the good answer is to declare the foreign currency loan contracts null and void. That is, when the debtor obtained the loan, he received an amount of forint in his account, but in the loan contract in foreign currency it was agreed with the bank that the forint would be converted into an amount in foreign currency for which he pays the fees administration, interest, various other costs and the debtor assumes the exchange rate risk. during the term of the contract.
“If these contracts are indicated as not valid, it means that you have received an amount of forint, but you have not agreed with the bank to convert it, for example, into Swiss francs. So the bank only has to return one florin, ”said the lawyer. He added that if the contract is void, there is no handling fee, no other cost or market interest. In the case of the latter, according to him, the old Civil Code. It may be the governing body, who states that in the absence of a separate interest rate agreement, the central bank base rate will apply.
The court decision can also have an effect on the mortgage rights, because if the contract contained it – evident in the case of mortgage loans – the mortgage will also be void. This can only complicate the situation further, especially for those whose houses may have been auctioned.
If the basic contract is void, the foreign currency borrowers will have the convenient and economically advantageous position of having to repay the bank only the amount of florins they have received, in addition to the central bank base rate, all other costs and liabilities will be eliminated.
– Summarized the situation in the event of a judicial decision with a positive result for the debtors.
It hurts the banking sector
All in all, it can be a large amount. Regarding the lawsuits in the CJEU, several media outlets have recently referred to the estimate of the Frankfurter Allgemeine Zeitung: the German newspaper, analyzing a previous court decision in a case of a Polish couple, wrote that banks operating in the region from Eastern Europe may cause a loss of 6.5 billion HUF at the current exchange rate.
A 2015 analysis by GKI Gazdaágkutató shows that the foreign currency retail loan portfolio peaked at the end of 2008, at almost HUF 6 billion. In the same analysis, in relation to the forint conversion, it is also mentioned that around HUF 3 billion of the costs were borne by the population and almost HUF 2 billion by the banking sector, thanks to which banks were able to record a loss record in 2014.
Such a decision would radically upset the banking sector, it is a huge amount of money. If someone has repaid your loan for many years, your debt may have been extinguished, since in this case all previous payments would have to be converted into repayments of principal, and the debtor may have paid so much that in the end they can get their money back. . from the bank.
Signs?
The lawyer believes that if this decision is made, there will be indications: in his opinion, Márton Nagy, deputy governor of the MNB, and Zsolt Barna, deputy director general of the OTP, will be forced to resign in summer.
“The litigation and parallel proceedings of the European Commission have been going on in the background since the beginning of the summer, I think these are the first signs that something is wrong in the financial system and the closer we get to the decision, the more you will see a sign of this, ”said the lawyer.
What should debtors do?
Basically, the goal is that the debtor does not have to sue, banks must recognize that the court decision is against them and enforce the court decision even if their name is not on the court order, the lawyer said. Although it is difficult to imagine, as a layman, that the bank voluntarily and lonely seeks, let’s say, a debtor from Óbuda,
“Dear debtor! Based on a court decision, so many returns, where do we mean? ”.
According to Dénes Lázár, it would be enough for the debtor to write to the bank referring to the court ruling. He stressed that if the litigation were to end, the bank would run the risk, in the event of a lost lawsuit, of being able to pay the attorneys’ fees in addition to the costs of the litigation.
However, if there is a decision of the CJEU on this, it will already be binding on the Hungarian courts.
(Cover image: (MTI / Court of Justice of the European Union)
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