Parliament approves FX loans law

Issues

The Hungarian parliament today approved legislation affecting retail borrowers that incorporates a legal uniformity decision by Hungary's Supreme Court, the Curia, taken in June.

The law was approved with 184 say votes and one no vote with two abstentions.

The law voids the practices of using different exchange rates for disbursement and repayment of foreign currency-denominated loans and of making unilateral changes to all retail loans unless lenders successfully defend such changes in court.

The rules for refunding clients affected by the law will be laid down in separate legislation.

National Bank of Hungary deputy governor Ádám Balog said late in June that the refunds could cost Hungary's financial system HUF 600 bln-900 bln.

A last-minute change to the retail borrowers bill clarified the prescription period for the legislation, stipulating that a statute of limitation cannot be applied to a retail loan contract as long as the contract is in force. The prescription period, affecting the full run of the loan, can start only after the termination of the contract, according to the amendment.

Other changes made shortly before the final vote limited the scope of the legislation to retail loans signed between May 1, 2004 – the day of Hungary's European Union accession – and the time the law comes into force, and extended the period lenders have to initiate court proceedings on unilateral changes to forint loans from 30 days to 90-120 days after the legislation comes into force.

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