Foreign currency debtors - The act puts more strain on the banks than expected

The bill which purpose is to help the foreign currency debtors was accepted on the 4th of July 2014, this can rewrite many consumer loan agreements, in this case it can put a much bigger strain on the financial institutions than expected. The accepted bill is waiting to be signed by the president and is then going to be published by Hungarian official journal.

The act (which was entered into force between the 1st of May 2014 and before this act came into effect) can effect consumer loan agreements, but also loan agreements which are based on HUF and financial leasing contracts. The companies will not be affected, since according to the credit institution law, they are not considered as consumers and oblige to final repayment. Furthermore those persons will not be affected who dedicated their real property to Hungarian National Asset Management Inc.

The aim of this act is to manage the situation of the debtor, to relieve the courts and to give the financial institutions the chance for voluntary compliance.

The act declares the credit gap in foreign exchange rate contracts as unfair and invalid. As well as the use of different buying and selling rates, therefore the official currency rate of Hungarian National Bank is going to be implemented. They presume furthermore the contractual cause which contains unilateral interest raising or charge raising or fee raising as unfair, which is normative in the case of loan and financial leasing contracts. The pending lawsuits and judicial execution procedures are going to be suspended. The contracted agreements are going to be upheld by the act, but to avoid the conditions which are declared as unfair, close deadlines are set to fulfill the obligations by the financial institutions.

(i)      The conversion of foreign currency loans have to be carried out  90 days after the bill comes into force, the plan of conversion to the Hungarian financial supervisory authority has to be carried out within 60 days.

(ii)    the general contract terms and conditions and unique contract terms and conditions which contain unilateral modification of contracts shall be revised within 30 days after the bill comes into force on top of this, a report has to be made to the Hungarian financial supervisory authority, and at the same time they shall declare whether in their opinion these are unfair or not. If the Hungarian financial supervisory authority announces this as fair, they can commence a civil procedure against the Hungarian state, they then have a chance to do so 30 days from the time the bill came into force in, in case of HUF currency loans they have a chance to do so between 90 and 120 days. As in the lawsuit there is no possibilities to complete the documents, the burden of proof encumber the financial institutions, this is a vital information for those who are submitting a claim, especially since the act defined the proceeding fee in 1 500 000 HUF.

 

The act obligates the financial institutions to cut the unfair conditions, under the control of the Hungarian financial supervisory authority.

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