Supreme Court of Slovenia: If the Risk Assessment is Deficient, the CHF Loan is Invalid
In most cases (where the aggrieved party has suffered damages resulting from a foreign currency loan) the Hungarian courts declare only partial invalidity of the agreement. Another problem is that referring to some – very unprofessionally and ambivalently phrased – verdicts of the Supreme Court of Hungary the courts only examine the formal existence of the risk assessment.
We stressed in processes for years (successfully in many cases) that this practice is highly inappropriate. We have also emphasized that according to Council Directive 93/13/EGK, the legal background of the similar cases will be almost the same in the other European states’ legal systems; so the full-blown legal practice of the other states should be taken into consideration.
The Supreme Court of Slovenia recently passed a judgement in favour of the borrowers and adjudged the complete invalidity of a CHF-based consumer loan agreement based on the same arguments as our Firm kept stressing for years. The decision from January 2018 has been reported by the Hungarian press too.
Though we don’t have the complete reasoning yet, we could summarize the essence of the oral reasoning following the Slovenian press release.
The Supreme Court has decided that the CHF loans are not conventional agreements but high risk financial products, and the banks didn’t provide enough information for the consumers about the loan agreements. The judgement verified that the requirements of the judgment of the European Court of Justice in the case C-186/16 were not met. The Court stated that:
- Though the terms concerning the CHF were grammatically correct, there was no clear and plain explanation about the factors influencing the mechanism and about the occurrences that could possibly result the change of the exchange rates, which were unknown to the consumers.
- The CHF loans are not conventional loans but loans that have a close relation to the FOREX market, therefore the bank should inform the customers about that too.
- The bank has to provide information about how the Euro’s significant deprecation will take effect on the remaining debt and how it will raise the installments.
- In the case of a special product, which is not a conventional mortgage but a complex financial product, the bank has to inform the customers through special consultants with specific qualification for this kind of work.
- The bank didn’t offer any products for the consumer to lower the risk of the exchange rate fluctuations, whilst he is completely protected against them.
- The bank knew that the consumers don’t have CHF income and that they don’t want to speculate as investors, so they choose the loan only because of the lower interest rates.
- Finally the bank knew that the Euro deprecation and the deterioration of the consumer’s credit standing as result goes beyond the consumer’s capacity.
The Court has emphasized that the similar decisions of the German and Spanish Supreme Courts were given persuasive consideration in the reasoning.
If you are interested in the details, please don’t hesitate to contact us!