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Constitutional Court Approves Legislation On Forex Loans

By Tamás Székely // 2015.03.19.

Hungary’s Constitutional Court said the use of exchange rate margins in calculating repayments on forex loans was in line with the constitution. The court said that provisions in borrowers’ relief legislation concerning the banks’ practice to use exchange rate margins in such cases did not go against the fundamental law.

A review of the law was initiated by three financial institutions and a private individual in October. The court said that the ban on retroactive legislation cannot serve as a ground to leave unfair, therefore invalid, contractual provisions in contracts made en masse in the past, and, consequently, the obligations of debtors, unchanged under any circumstances.

The borrowers’ relief legislation approved in the summer of 2014 requires lenders to compensate retail clients for using exchange rate margins when calculating repayments for foreign currency-denominated loans and for making unilateral changes to both FX and forint loan contracts. Banks were allowed legal recourse regarding the unilateral changes to contracts. The court had rejected complaints regarding the provisions in borrowers’ relief legislation prohibiting unilateral changes to loan contracts already in November 2014.

via photo: public domain