ECJ: National courts can rule on FX loans

Issues

The European Court of Justice (ECJ) today ruled that it is within the competency of national courts to take legal measures in the interest of re-establishing fair and balanced conditions between parties in foreign currency-denominated loan contracts and maintaining the validity of those contracts.

The ruling was made in a case involving a Hungarian lender and borrowers with a foreign currency-denominated loan. The case raised the question of whether the provisions in the contract concerning the exchange rate margin could be considered from the viewpoint of unfairness.

The court said that clients who take out credit denominated in foreign currency must be capable of assessing the economic consequences that result from the debt being repaid at a different rate than it was disbursed.

In February, an advocate general of the court said in an opinion that determine whether borrowers were fairly informed of costs resulting from exchange rate margins in forex-based loan contracts is within the legal purview of Hungarian courts. 

The Kúria ruled in December 2013 that forex-based bank loans were valid, but said it was waiting for the European court’s stand on questions regarding unilateral changes to loan contracts by banks as well as exchange rate margins.

Kúria director Péter Darák said at that time that the Kúria would be in a position to make a complete ruling once the ECJ had put its opinion on unclear issues concerning whether unilateral amendments of credit contracts were fair.

– material from national news service MTI was used in this article

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