EUR;CoE;EU;CECC;JCCJ;WCCJa) Hungary / b) Constitutional Court / c) / d) 02-02-2015 / e) 2/2015 / f) On retail loan contracts / g) / h) .
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General Principles - Separation of powers.
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General Principles - Certainty of the law.
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Fundamental Rights - Economic, social and cultural rights - Consumer protection.
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Legislation on retail loan contracts that allows banks to unilaterally raise interests on foreign currency-denominated loans, laid the groundwork for requiring lenders to compensate retail borrowers for making unilateral changes to contracts and for using exchange rate margins when calculating repayments for foreign currency-denominated loans.
Summary:
I. The Metropolitan Appeals Court had submitted a request to annul parts of Act XXXVIII of 2014 on the settlement of certain questions related to the Uniformity Ruling of the Curia on financial institutions consumer loan contracts (hereinafter, the "Settlement Act") in connection with court cases involving four banks: K&H, KDB Bank, Porsche Bank and evoBank. The request was made based on the argument that the Settlement Act violated the principles of the separation of power and legal certainty.
The Settlement Act requires lenders (banks) to compensate retail clients for using exchange rate margins when calculating repayments for foreign currency-denominated loans and for making unilateral changes to both foreign currency-denominated and foreign loan contracts. Banks were allowed legal recourse regarding the unilateral changes to contracts. They had to provide evidence that the disputed contractual terms were fair, but none succeeded.
II. The Constitutional Court rejected the request of the Metropolitan Appeals Court to annul some parts of the Settlement Act.
The Constitutional Court said it had rejected constitutional complaints regarding the provisions in borrowers' relief legislation prohibiting unilateral changes to loan contracts already in its Decision no. 34/2014. It added that legal certainty requires certain standards of clarity and the predictable operation of legal institutions.
The Settlement Act laid the groundwork for requiring lenders to compensate retail borrowers for making unilateral changes to contracts and for using exchange rate margins when calculating repayments for foreign currency-denominated loans. In Decision no. 34/2014, the Constitutional Court ruled that prohibiting unilateral changes to loan contracts did not go against the Fundamental Law.
In its current decision, the Court reviewed the petition mainly from the point of view of separation of powers. It emphasised that by naming the State as a defendant in the trial, the legislator did not prefer it as a party to the trial, but only introduced special procedures in defence of consumer interest:
What happened was not that the state abused its power to create a situation whereby the opposing party is in a disadvantageous position as against the other party, but that the financial institutions had to initiate legal proceedings against the state to overturn the assumption.
Thus, according to the justification, the State did not abuse its power and did not create a situation where the other party to the trial was at a disadvantage.
III. Judges Ágnes Czine and Tamás Sulyok attached concurring opinions to the judgment, judges László Kiss, Milós Lévai, Péter Paczolay and Béla Pokol attached separate opinions to the judgment.
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Constitutional Court:
Hungarian.