Finally, a guiding decision which is favourable for commercial banks has been passed by the Supreme Court in Hungary ("Curia"). This is the Curia's third resolution on general legal instructions in connection with consumer foreign exchange ("FX") loan agreements and it has just been published under uniformity decision no. 1/2016 PJE.
In short, the story behind the decision begins around 2007 when FX (for instance Swiss Franc or Euro) based loan agreements became far more popular than those based on the Hungarian Forint, primarily due to the fact that they offered remarkably lower interest rates than those based on the Hungarian Forint. A couple of years later, these agreements landed on the table of the Curia. The banks had a unilateral right to modify the loan agreements and these amendments turned out to be disadvantageous to consumers. Additionally, as time passed, the exchange rates changed adversely due to the global financial crisis. This ultimately led to a rise in installments – some consumers needed to pay exactly double the initial installment paid, and as a result some debtors could no longer afford to pay their debts.
The public spirit grew tense and hundreds of lawsuits were filed at the courts. The plaintiffs argued that the loan agreements were null and void or at least invalid. The courts however, reached completely contradictory decisions.
Though Hungary traditionally is not a common-law country, if there is a discrepancy in court decisions on such a grand scale, the Curia, in order to unify and improve case law, can express a guideline to be followed by lower courts in similar cases. The first guideline was issued in 2013, then a second in 2014, and as creativity regarding argumentative conditions of loan agreements seems to be infinite, the need for a third guideline emerged.
A large number of plaintiffs claimed that the FX loan agreements did not specify the main obligations under the agreements in sufficient detail, nor were the number, amount and due dates of the installments detailed enough. As a result, the Curia decided to express a third guideline regarding these issues and clarified that the subject of the agreement (the loan) is well determined if the exact amount of the loan can be calculated either at a later given date or, in the absence of such date, at the time of disbursement. The same rule applies to the number, the amount and the due dates of the installments. The Curia's guiding decision is now compulsory for lower courts and thus, such a guideline has to be followed when ruling on claims addressing these stipulations in loan agreements.
The Curia's third guiding decision regarding FX loan agreements is truly favourable to commercial banks and thus, was eagerly awaited by them.