Foreign Currency Loans – House adopts Act on Foreign Currency Loans

Parliament adopted the first law to assist foreign currency debtors in connection with the Court of Justice’s Uniform Resolution on Consumer Loans for Financial Institutions.

The House passed the law on Friday, with 184 votes in favor, 1 against and 2 abstentions, which will enter into force on the eighth day following its promulgation.
By eliminating unfair terms in foreign currency loan contracts, the law maintains the concluded contracts. The null and void exchange rate difference – the application of different buying and selling rates – shall be canceled, and the amount paid and repaid or any costs, fees and commissions denominated in foreign currency shall be determined at the official exchange rate of the National Bank of Hungary (MNB).

Financial institutions are required to recalculate disbursements


within ninety days of the entry into force of the Act. On the basis of the conversion, financial institutions must settle accounts with the consumer in a manner specified by law.
Certain provisions of the law also apply to Forint-based creditors, but not to end-of-life loan agreements, or to those whose loan agreement has been settled by the asset manager.
At the same time, the provisions on unilateral contract modification also apply to forint-based credit or loan contracts and financial leasing contracts.

In particular, the law obliges financial institutions to eliminate unfair clauses from the terms and conditions they apply.
With regard to a consumer loan agreement that includes the possibility of unilateral contract modification, it must be “presumed” that the contractual clause providing for unilateral interest, cost increase, and fee increases is unfair, given that it does not comply with the Seven Principles.

These are the principles of unambiguous and comprehensible wording


Itemized definition, objectivity, actuality and proportionality, transparency, cancellation and symmetry.
A contractual clause allowing unilateral amendment of a contract shall be null and void if the financial institution has not instituted civil litigation within the statutory time limit, or the court rejects the action or terminates the lawsuit.

These contractual clauses are fair if the financial institution proves in civil litigation that they comply with all seven principles.
Within 30 days of the entry into force of the Act, financial institutions should review the terms and conditions of a consumer loan agreement that include a clause providing for unilateral contract modification. Institutions should report the asf to the MNB and state whether they consider the terms and conditions contained therein to be fair or unfair.
The law also lays down rules for civil litigation that may be instituted by banks. The Act designates the Metropolitan Court as the body with exclusive competence and competence.
Banks may not unilaterally increase interest, costs and fees on consumer loans until a final court decision has determined that their terms and conditions are fair.

Provides for the suspension of pending lawsuits and executions


Until December 31 at the latest. The Act applies to credit agreements entered into on or after May 1, 2004, and until the Act enters into force.
In the case of existing contracts, whether in forints or in foreign currency, the limitation period may commence only if the contract has been terminated.
The Cabinet government is expected to take further legislative steps at this year’s autumn session of Parliament, which will include final settlement rules, other substantive legal issues, and legal consequences.

The Court said on June 16 that the exchange rate spread applied to foreign currency loans is unfair, but the fairness of exchange rate risk can only be examined if the average consumer is unable to understand the relevant part of the contract due to inadequate information from the financial institution. The possibility of unilateral contract modification is subject to very strict conditions (MTI).

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