BUDAPEST, September 2. (Reuters) – Hungary acted unfairly to borrowers with regard to the exchange rate set for repaying loans denominated in foreign currencies, the European Union’s Supreme Court ruled on Thursday, rejecting a request to invalidate such agreements.
The foreign currency lending problem put pressure on Hungarian borrowers and banks in the first half of the last decade, after many of them took out large loans in euros and Swiss francs to take advantage of significantly lower borrowing costs.
The Hungarian borrower challenged the provision in the 2007 loan agreement with the Hungarian OTP. OTPB.BU Group, stating that the practice of issuing loans at the foreign currency purchase rate and paying payments at the selling rate is unfair and therefore the contract should be invalid.
Subsequently, Parliament passed a law stipulating that the official exchange rate of the National Bank of Hungary should be applied both when granting and repaying loans.
Since then, banks have converted retail loans to forints using NBH to save borrowers from foreign exchange risk.
But the Hungarian borrower refused to withdraw the lawsuit, and the Hungarian court asked the European Court of Justice to make a final decision.
The Court stated that it “notes that the decision taken by the Hungarian Legislature is in line with the aim pursued by (the Bad Contract Directive), which is to restore the balance between the parties while preserving the validity of the agreement as a whole”.
It stated that such contracts could not be invalidated solely on the basis of a single provision detrimental to the interests of the borrowers.
“In accordance with the criterion of objectivity established by the Court in its relevant case-law, the position of one of the parties to the agreement cannot be considered, in accordance with national law, as a decisive criterion determining the fate of the agreement,” the statement said. said.
(1 US dollar = 293.2200 forints)
(Reporting by Gergely Zacach and Fu Yun Chi, editing by Mark Heinrich)
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