THE ALPHA BANK recently failed in its court action against a British national, ‘xxx Johnson’, who it accused of failing to comply with the obligations of his Swiss Franc loan agreement concluded with the bank in August 2008.
(Regular readers will recall that in 2016 the Cyprus Consumer Protection Service (CCPS) fined Alpha Bank Cyprus €250,000 for its business practices relating to mortgage agreements.)
In his defence, Johnson argued that the loan agreement was unenforceable as the Alpha Bank ‘forced’ him into the Swiss Franc loan agreement and, by failing to explain the risks associated with foreign currency loans, the bank violated Article 4(2) of the European Directive 93/13/EEC of the 5th April 2003 on unfair terms in consumer contracts.
One of the witnesses who gave evidence on behalf of the bank who was present when the loan agreement was signed acknowledged that there are risks in foreign currency lending – and pointed out that it’s the bank’s usual practice to explain the risks to borrowers. However, he did not know whether the risks had been explained to Johnson.
Johnson explained that he was not an expert in financial matters and that the bank had advised him to take a Swiss Franc loan because of its low interest rate. All the bank told him that the loan would be for CHF 302,000 repaid with 175 tranches of CHF 2,274.96. At no time did the bank advise him of any risk and, in particular, that his monthly instalments would increase if the Euro depreciated against Swiss Franc.
Furthermore, the bank did not give him enough time to read and understand the loan agreement or the opportunity to discuss it with a lawyer or financial adviser to explain the terms and consequences of a Swiss Franc loan.
The judge agreed that Johnson would be unaware of the inherent risks associated with foreign currency loans and, furthermore, the bank had failed to provide any evidence to the court confirming that it had advised him accordingly.
Following various legal arguments and rulings in related cases (one of which was a judgement of the European Court of Justice), the judge rejected the bank’s claim and awarded costs to Johnson.
Alpha Bank Cyprus Ltd ?. Johnson ?.?., ????? ??.: 1267/2012, 29/3/2019 (Court decision – Greek)
Although the Larnaca court’s ruling looks positive, Alpha Bank Cyprus may appeal.
This ruling by the Larnaca court does not set a precedent – only rulings by the Supreme Court can set a precedent.
Last month, Greece’s Supreme Court overwhelmingly ruled that some 70,000 who took out loans in Swiss Francs will have to repay them at the current exchange rate. See Swiss franc loan court decision in favour of banks.