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ECJ ruling protects consumers with Swiss franc loans

Consumers who received a loan in a foreign currency from a bank are protected from exchange rate fluctuations by a ruling of the European Court of Justice according to lawyer Pavlos Angelides.

ECJ ruling protects consumers with Swiss franc loansCONSUMERS who received loans in Swiss francs from banks are protected from exchange rate fluctuations; a lawyer said a day after the Swiss National Bank scrapped the currency’s cap to the euro exchange rate.

As a result, Switzerland’s national currency gained more than 15 per cent towards the euro in two days and was traded today close to 1.01 francs per euro.

A source at Bank of Cyprus, the island’s largest lender in terms of loans, said on condition of anonymity that Swiss franc borrowers would see their monthly instalment increase. A Central Bank of Cyprus official said the supervisory authority was monitoring the situation.

“Consumers who received a loan in a foreign currency from a bank are protected by the ruling of a European Court from exchange rate fluctuations, provided the bank had bought the amount in question and is not exposed to the currency risk,” lawyer Pavlos Angelides said in an interview. “Otherwise, if it receives more than that amount, it achieves a super profit at the consumer’s expense. The court placed it under the protection of the consumer chapter”.

Angelides, who referred to an April 30, 2014, ruling of the European Court of Justice following a complaint filed by two consumers against Hungary’s Jelzálogbank, said that following yesterday’s revaluation of the franc, bank individual clients, not companies, should not necessarily accept any further claims from commercial banks.

The only case in which a consumer who took a loan in a foreign currency may be affected by its revaluation is in cases in which someone buys something and agrees to pay in a foreign currency with an agreed amount in certain instalments, Angelides said.

The Bank of Cyprus source said that the ruling does not apply to Cyprus as Hungary is not a euro area member. Lawyer Angelides countered that “the European Union has common laws for all its members”.

The Cyprus News Agency reported today citing Yiangos Demetriou, who heads the supervision department at the Central Bank of Cyprus that the supervisory authority “cannot do many things and it just monitors the situation and see how things go”.

According to the latest central bank figures, overall lending in Swiss francs in the Cypriot banking system stood at 3.2 billion euros in November.

Time will tell which percentage of this amount will become non-performing, CNA reported citing Demetriou.

The Bank of Cyprus source said the share of the lender, which in March 2013 merged with failed Cyprus Popular Bank, is 30 per cent of overall Swiss franc loans in the banking system.

“Around 20 per cent of them have already been restructured and are now at a marginal point,” the source said adding that Bank of Cyprus expects a significant number of customers who had their loans in franc restructured to ask for another restructuring.

Bank of Cyprus a total of 2,600 clients who took a Swiss franc loan and the average outstanding amount in the case of consumers is 220,000 euros and in the case of companies nearly three times as much, the source said.

The trend in borrowing in Swiss francs emerged in 2006, when Cyprus, which was then candidate for euro area membership.

Readers' comments

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  • Colin says:

    I notice that the lawyer Pavlos Angelides is saying that consumers are protected but I have not heard or seen any court cases in Cyprus where this has been upheld. I have googled his name but the website for his company is a dead link. Are there any lawyers that would be interested in taking on my case on a win only basis. This may be the test case that Swiss Franc mortgage holders need in Cyprus.

  • Augean Stables says:

    I wonder if anyone has let the Banks know ? I cannot imagine they will care, as this judgment is a couple of years old and appears to have made not a jot of difference.

  • Tine says:

    Did you give up then Colin? Or did you join a group to file a claim?

  • Colin says:

    I used a solicitor to pursue a claim with the Bank of Cyprus with no success. I also had a meeting with the BoC manager who told me that in their opinion they had not mis-sold Swiss franc loans or done anything wrong so they were not paying any compensation to any clients.

  • @Tine on 2015/01/18 at 4:21 pm – There are a number of UK-based law firms acting on behalf of clients alleging they were mis-sold Swiss Franc loans. They are all somewhat ‘secretive’ on the progress they’ve made. But I understand that some cases will be heard in court towards the end of this month and following months (assuming there are no postponements).

  • Tine says:

    Is it any result of refund from Bank of Cyprus with the british lawfirm ?

  • Steve says:

    From the experiences of the Public Swimming Pool regulations there are times when the local laws can be enforced rather than the EU Laws.

  • Steve R says:

    Just watch the NPL figure rise now. I for one would not be able to cover any further increase and another restructure would mean I would have to live to be 105 years old before my loan would be paid off. Factor in the fact that my title deeds are nowhere to be seen just makes me conclude that the easiest way out of this would be to declare voluntary bankruptcy. I don’t have any assets except the property to which the loan is attached and my savings have dwindled to next to nothing. The property is now in negative equity.

    If the banks want to implement these increases just so they can make super bonuses then I would look again if I were them. Many, many more people are in the same situation as me.

  • AJWC says:

    Responsibility?

    So who, how and when is going to champion the rights of the consumer.

    Get the banks to concede they are acting unlawfully and make amendments to these catastrophic loans.

    I understand some commentators state, consumers took out loans in CHF due to the low interest rates. That is simply not true, some people may of had that option! Many People (not financial experts) were lead up this path and miss sold. The banks did not act with due diligence or in the best interest of their customer.

  • Tine says:

    The question is how serious is this for Cyprus and the banks?

    Is this the first step. The second step is that Cyprus goes back to CYP and devalues the currency by 50%.

    Never ending Cyprus nightmare

  • Peter Davis says:

    It makes no difference if Hungary is a Euro member or not. EU law supersedes any rules or regulations of member states.

    This is a ruling of law not currency.

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