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Supreme court launches forex loan uniformity procedure

Issues

Hungary’s supreme court, the Kúria, has launched a legal uniformity procedure on the validity of foreign currency-denominated loans, a motion published on the court’s website on Monday shows.

The motion, made by the head of the Kúria’s civil department György Wellmann, aims to determine whether forex-based loans are foreign currency loans or forint loans, and whether forex-based loan contracts are valid or invalid.

The motion reportedly:

●  seeks to establish the obligations of lenders to inform borrowers when signing forex-based loan contracts and the legal consequences of failing to meet these obligations;

●  sets out to find the legal possibilities for courts to remedy harmful effects resulting from changed circumstances after the signing of such contracts;

●  aims to define the legal measures courts may take if the forex-based contracts are found to be invalid, and whether such invalidity can apply in whole or in part to the contracts; and

●  seeks to ascertain when unilateral changes to contracts meet transparency requirements.

Prime Minister Viktor Orbán said in an interview broadcast on public radio on Friday that the government expected the judiciary to decide whether banks or borrowers should bear the burden of losses on forex-based loans resulting from exchange rate changes. He told Kossuth Rádió that “sober values would otherwise dictate” that banks should carry the burden, noting their strength and their professional competence.

He said the government also expected the judiciary to take a decision on whether banks can make unilateral changes to interest rates on loans that were taken out earlier.

Asked whether there was a deadline for the court to take the decisions, Orbán said the government does not rush the judiciary, but added that he hoped to see the decisions “as soon as possible.”

Orbán said a week earlier that a legal uniformity decision by the Kúria, Hungary’s supreme court, would allow the government to take a decision on the forex-based loans that “is in harmony with the legal position established by the judiciary.”

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