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Court rules eight banks overcharged on loans

A ruling by a Croatian court, which concluded that eight commercial banks had overcharged borrowers, may offer some hope for those who bought property in Cyprus using loans denominated in Swiss Francs.

A CROATIAN court ordered eight commercial banks to recalculate loans denominated in Swiss francs into the national currency at a fixed interest rate, saying they had overcharged borrowers.

Judge Radovan Dobronić ruled that the banks acted contrary to the provisions of the Consumer Protection Law as they contracted loans denominated in Swiss Francs while failing to advise clients of the potential risks.

“This is contrary to the provisions of the Consumer Protection Law, a violation of the Law of Obligations, and the banks are required to reduce the principal to the amount of the domestic currency, Croatian kuna, issued at the beginning of the loan. The interest rate should be applied to the principal calculated in kuna.

“The applied interest rate should be the same as the one determined at the beginning of loan, and it has to be fixed interest rate for the whole repayment period.

“Burden of litigation costs borne by the bank,” said judge Dobronić.

The plaintiffs’ counsel, Nicole Kwiatkowski, is satisfied with the first-instance judgment and pointed out that the judgment was positively though, is still only the first instance verdict. “We have done a lot, but it still does not mean that something will change for those citizens who have been harmed, because there is still appeal” – said Kwiatkowski.

Economist Branka Lukačević-Gregić said “The judge has successfully applied the laws on the economic matters showing exceptional knowledge and understanding of the problem noting all the harmful effects in the synergy of contractual parameters.

“Finally, the judge pointed out well that the variable interest rate unilaterally applied to the variable amount of the principal (application indexed). The loan user, as a non-professional, had very little information and all the risk on their backs compared to banks, which are professionals and had all the information available and transferred almost all the risks to the consumers”.

This ruling will not compensate individual loan users, who will have to raise individual claims against the banks. To avoid high pressure on the bank and the judiciary, the judge urged the bank to reconsider the settlement.

Four of the banks said they would appeal against the verdict, which local media portrayed as a victory for consumers whose rights will be enhanced following the country’s recent accession to the European Union.

The other four banks, which are also expected to appeal, were not available for comment and the central bank, which regulates and monitors the banking system, declined to comment.

The lawsuit was filed by Potrosac, a consumer protection group, on behalf of 100,000 citizens who had taken loans pegged to the franc in the past decade, three-quarters of them housing loans.

Last month Poland’s financial watchdog, KNF, stepped in to curb local banks granting mortgages denominated in a foreign currency. Its recommendation, which will come into force at the end of this year, urges lenders to issue mortgages in the same currencies as clients get their income.

Readers' comments

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  • Costas Apacket says:

    Can anyone see a similar ruling by a Cypriot court against their koumbaros the Property Developers?

    I think not!

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