Supreme Court of Slovenia: In the event of insufficient risk disclosure, a CHF-based loan agreement is void

Before Hungarian courts, loan agreements with exchange-rate-linked interest are regularly declared partially invalid. In many judgments of the Hungarian Supreme Court, however, risk disclosure is addressed only in a formal sense. For years, we have argued — in many cases successfully — that this approach is inappropriate. We also regularly emphasise that, under Directive 93/13/EEC, the legal assessment of comparable cases should be consistent across the Member States of the European Union. The decisive factor should therefore be an examination of the legal practice of all Member States. Only recently, the Supreme Court of Slovenia ruled in favour of the borrower in relation to an exchange-rate-based loan agreement and held that the loan agreement was void in its entirety. It is remarkable that the Slovenian court followed precisely the line of reasoning that NZP NAGY LEGAL has been advancing for years. The Slovenian judgment attracted considerable attention, including in the Hungarian press. Although the full reasoning of the decision is not yet available to us, we can summarise the press release issued by the Supreme Court of Slovenia. According to the judgment, loan agreements with exchange-rate-linked interest are not to be classified as conventional contracts, but as risky financial undertakings. They require detailed information that is understandable to the consumer. The court found that the requirements laid down by the CJEU in judgment C-186/16 had not been met in the case at hand: · The contractual terms must be explained clearly and intelligibly; the consumer must be informed of the factors influencing the interest mechanism, and possible exchange-rate fluctuations must also be addressed. · CHF-based loans are not conventional loans; they are closely linked to the foreign exchange market, and the consumer must also be informed of this. · The bank’s duty to provide information also includes explaining that a negative development of the euro increases both the debt and the interest burden. · Where the loan contains special features that differ from the normal case, the bank is also subject to a duty to provide information in that respect. · The bank must recommend options to the consumer that reduce exchange-rate risk. · Especially where consumers have no income in CHF, they cannot be treated as speculative investors; consumers generally choose an exchange-rate-based loan agreement only because of the lower interest rates. · Furthermore, the bank bears a particularly heavy burden where it was aware of the fall of the euro and the consumer’s financial overburdening. The Slovenian Supreme Court also emphasised that German and Spanish judgments had been taken into account in the case. If this topic is of interest to you, please do not hesitate to contact us.