Wednesday, 9 February 2022

Supreme Court Makes Two Important Decisions for Consumers and Banks

ZAGREB, 9 Feb 2022 - The Supreme Court said on Wednesday that it had made two decisions "relevant for a large number of ongoing cases against banks launched by bank clients", which the Franak association welcomed, saying it expected the highest court to rule by Easter on the nullity of contracts on CHF-pegged loans as well.

The Franak association brings together former holders of loans pegged to the Swiss franc.

The Supreme Court said that in one of its two decisions, it allowed a review motion against a second-instance court ruling related to the following legal issue, whether "in an appeal against an enforcement ruling and the subsequent proceedings, to have the enforcement declared impermissible, one can insist on the circumstance that points to the nullity of the notarial act (consumer contract), which constitutes the enforcement order in the enforcement proceedings."

"This is a legal matter that requires the Croatian Supreme Court to adopt a legal position in line with the Court of the EU in the application of the Unfair Contract Terms Directive, which should result in the evolution of law through legal practice," the court said.

Franak believes this means that the Supreme Court will decide whether enforcement may be carried out if implemented on the basis of an invalid contract, but also on the basis of a contract containing invalid contractual provisions, i.e. on the basis of a partially invalid contract.

"That decision will apply to all loans with the CHF currency clause, but also to euro and kuna-denominated loans with contractual provisions on invalid interest rates," the association said.

In the other decision, the Supreme Court refused a review motion by a bank, upholding decisions by lower courts and taking the position that as the plaintiff, the bank must compensate the consumer for litigation costs regardless of the fact that the client had withdrawn the lawsuit.

Franak said this decision is not related to a decision on consumers' right to compensation after the conversion of CHF-pegged loans to euro loans, which it expects the Court of the EU will make by May.

"If, however, the Court of the EU decides that our case is not within its jurisdiction, the decision on conversion and compensation will be made by the Croatian Supreme Court, but this specific review motion has nothing to do with that either," the association said.

It expressed satisfaction that the Supreme Court president "is doing what he promised to do" and that it expected "the issue of nullity of contracts on CHF-pegged loans to be resolved by Easter."

The position of Supreme Court president is held by Radovan Dobronić, who on 4 July 2013, as a Zagreb Commercial Court judge, delivered a ruling in favour of the Consumer Protection Association which had sued eight banks with regard to the Swiss franc foreign currency clause and their unilateral decision to increase interest rates.

Dobronić said at the time that the banks had violated consumers' rights by failing to fully inform them about all the parameters necessary to decide on taking loans.

The ruling on the legal nullity of the currency clause in contracts on loans pegged to the Swiss franc, was later upheld by the High Commercial Court and its ruling was upheld by the Constitutional Court.

For more, check out our politics section.

Friday, 14 June 2019

20,000 Civil Suits Brought Against Banks over Swiss Franc Loans

ZAGREB, June 14, 2019 - MP Goran Aleksić of the opposition SNAGA party said on Friday that at least 20,000 civil suits had been brought against banks whereby clients who took Swiss franc loans seek reimbursement of overpaid amounts.

The exact number will be known in the weeks ahead, he said at a press conference.

Aleksić recalled that the Supreme Court ruled that holders of CHF loans who converted their loans into euro were entitled to sue banks and seek a refund of overpaid interest. He said the Supreme Court was expected to decide on reviews filed by banks to that ruling by the end of July.

That will be followed by a new wave of civil suits brought over the exchange rate difference, which makes up 66-75% of the total overpaid amount, Aleksić said, adding that he expected 100,000 suits against banks to be brought by June 2023, when the statute of limitations expires for the exchange rate difference.

Attorney Nenad Horvat said that if the Supreme Court ruling on reviews filed by banks was in favour of clients, the number of new suits would surge. He said parliament should adopt a law for the compensation of all damaged clients, otherwise the courts would be swamped with CHF loan cases.

More news about Swiss franc loans can be found in the Business section.

Tuesday, 2 April 2019

NGO Praises Supreme Court Ruling on Loans in Swiss Francs

ZAGREB, April 2, 2019 - The Franak association of holders of loans previously denominated in Swiss francs said on Tuesday that the Supreme Court had ruled that people who had converted their CHF-denominated loans into euro loans under the Consumer Credit Act were entitled to sue banks and seek a refund of money that banks had taken from them illegally.

The Supreme Court has found that the fact that consumers signed an annex to their loan agreements and converted their CHF loans into euro-denominated loans does not mean that they automatically lost interest in determining that some of the provisions of the loan agreement were null and void, Franak said.

Opposition MP Goran Aleksić told Hina that claimants would certainly seek the difference between the exchange rate and interest, adding that banks would have to pay back all overpaid amounts plus default interest. He said that the Supreme Court ruling applied to all converted loans.

About 125,000 people concluded CHF-denominated loan agreements, of whom 70,000 had previously become entitled to sue, while the remaining 55,000 have now received legal security that they can sue for a refund of overpaid interest. If they all go to court, banks will eventually have to pay more than 10 billion kuna (1.35 billion euro) in overpaid amounts, Aleksić said.

Franak said that the statute of limitations on overpaid interest runs out on 13 June 2019.

More news on Swiss franc loans can be found in the Business section.

Friday, 29 March 2019

Swiss Franc Loans Ruling Step in Right Direction

ZAGREB, March 29, 2019 - SNAGA party member of parliament Goran Aleksić said on Thursday that the Supreme Court's decision whereby decisions by banks on the variable interest rate on loans pegged to the Swiss franc in the period from 1 January 2013 to 1 January 2014 were declared unlawful, was good but that loan holders were still waiting for a crucial decision, the one on their right to claim back overpaid interest.

"We are waiting for the Supreme Court to deliver a ruling on whether, after conversion, we have the right to claim back overpaid interest. The current decision does not speak about that because the bank that was sued called only when it appealed for the lawsuit to be dropped due to conversion, however, under the litigation law, it was too late for that," Aleksić told Hina.

The Supreme Court has decided on what it could decide on. It could not decide on loan conversion because that could not be discussed and that is why a decision on converted loans is still being awaited, said Aleksić.

"What is good about this decision is the fact that the Supreme Court has confirmed what we have been saying all along, and that is that banks did not have the right to unilaterally set the parameters to change interest rates but rather that they had to agree on that with their clients," said Aleksić.

The Supreme Court said earlier in the day that decisions by banks on the variable interest rate on loans pegged to the Swiss franc in the period from 1 January 2013 to 1 January 2014 were unlawful because banks had not adjusted their operations concerning variable interest rates to the amended Consumer Credit Act.

Two decisions that are important for loan conversion have been submitted for a review and only the second decision by the Supreme Court is expected to bring a solution to the issue of converted loans, said Aleksić.

"Both decisions refer to converted loans and the second one that we are still waiting for refers to a review of a ruling that was unfavourable for the consumer and only when the Supreme Court rules on that, will we know our status," said Aleksić.

The Franak association, which brings together holders of loans previously pegged to the Swiss franc and converted to euro loans, and the SNAGA party in January called on the Supreme Court to deliver a ruling as soon as possible on reviews related to loan holders' right to compensation following loan conversion, considering the fact that the statute of limitations on their claims for overpaid interest expires in June this year.

More news about Swiss franc loans can be found in the Business section.

Thursday, 28 March 2019

Court Rules Variable Interest Rates on Swiss Franc Loans Was Unlawful

ZAGREB, March 28, 2019 - The Supreme Court said on Thursday that decisions by banks on the variable interest rate on loans pegged to the Swiss franc in the period from 1 January 2013 to 1 January 2014 were unlawful because banks had not adjusted their operations concerning variable interest rates to the amended Consumer Credit Act.

"Even though in order to correct the invalid provision, banks had specified in their offer to clients, in line with the law, the way the variable interest rate would be set, they unilaterally and contrary to the law, set an interest rate that was higher than the initially agreed interest rate," the Supreme Court said.

It said that because banks charged an interest rate that was higher than the one initially agreed to clients' demands to be refunded for the overpaid amount were justified.

The court said that its latest decision did not change its conclusion of 20 March 2018 that a class action discontinued the statute of limitations on claims by individual clients.

The Franak association, which brings together holders of loans previously pegged to the Swiss franc and converted to euro loans, and the SNAGA party in January called on the Supreme Court to deliver a ruling as soon as possible on bank audits in relation to loan holders' right to compensation following loan conversion, considering the fact that the statute of limitations on their claims for overpaid interest expires in June this year.

More news on Swiss franc loans can be found in the Business section.

Friday, 7 April 2017

Constitutional Court Confirms Law on Swiss Franc Loan Conversion

The Court rejected a request to declare as unconstitutional the law which forced banks to convert loans in Swiss francs into euros.

Thursday, 20 October 2016

Croatian National Bank Forced to Reveal Bank Secrets

Court accepted a request by the Franak Association.

Thursday, 6 October 2016

Banks Warn Government It Does Not Have Much Time for Agreement

Banks want the government to urgently come to an agreement about the issue of conversion of Swiss franc loans into euros.

Thursday, 29 September 2016

MOST and HDZ Differ in Their Approach to Conversion of Swiss Franc Loans

The issue of possible lawsuits by banks against Croatia due to forced conversion of Swiss franc loans into euros could become an obstacle in political negotiations between HDZ and MOST.

Sunday, 18 September 2016

UniCredit Bank to Sue Croatia for Forced Conversion of Franc Loans into Euros?

Conversion of franc loans in euros could bring Croatia and banks to court.

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