In September 2017 a case was referred to the ECJ by a Court of First Instance in Romania regarding the validity of certain terms included in a loan contract agreement entered by a Romanian couple with SC Banca Transilvania SA (C-627/15).
Although the ECJ’s Advocate General’s opinion adjudicated that the Court should not rule on referred matters once a case is no longer pending in the national court (the couple had actually withdrawn their claim in an out of court settlement), it is of essence to lay down the questions referred to the ECJ by the National court for a preliminary ruling as they deal with the protection and the fairness test laid down by virtue of Article 3 (1) and Article 4 of the EC Directive 93/13 on unfair terms.
The referred court asked the question whether a contractual provision included in the loan contract which allowed the Bank to unilaterally convert and lock the outstanding debt from CHF currency to Romanian national currency in case where the CHF currency denominated by more than 10% was being fair; additionally the national court went on to a hypothetical question, whether the Bank’s right to calculate the debt based on the rate in force upon such increase could fall within the fairness test whereas such a conversion was not optional to the consumer. It is worth noticing that according to the loan contract’s provision, the consumer’s only right was to request a conversion from CHF to Romanian lei but the Bank was not obliged to accede to that request.
Similarly the National court asked whether such a clause escaped the assessment of fairness due to its unilateral nature of enforcement or whether it fell within the scope of the protection granted by Directive 13/93 as it could be interpreted to be in favor of the consumer since the Bank by choosing to execute this provision would be protecting the consumer against the ongoing increase of the debt due to the CHF’s denomination and by that way the consumer would be protected from going default on his loan obligations which again, would not serve the Bank’s interests.
Strangely enough according to Article 3(1) 13/93 the increase of the debt due to the CHF currency’s fluctuations do not affect the unfairness test even if such currency denomination may have a negative impact on the price and remuneration that shall burden the consumer if written in plain intelligible language. In our opinion the increase of the Bank’s remuneration becomes inappropriate in relation to the actual service provided hence it may be deemed as unfair.
Although these valid questions remained unanswered in the present case study, they do raise serious concerns regarding the scope of certain provisions that are intentionally drafted in CHF loan contracts to secure the best interests of the banking institution especially when taking into consideration that it holds a financially predominant position compared to the average non-sophisticated consumer. Such clauses most of the times are not negotiated neither thoroughly explained with actual examples on how the foreign currency could denominate next to the national currency for the consumer to identify the potential risk and impact of such a fluctuation on the amount due in order to protect himself and seek professional advice prior to entering the loan contract.
It is precisely for these reasons that such contractual terms could be successfully stricken out and/or amended in such a way that the consumer would be called to pay off the increased debt calculated at the initial exchange rate (CHF converted to the national currency) that was in place when first entered the agreement and not at the increased rate that was in force on the actual conversion date. Indeed, the consumer can pursue such a formulated conversion by instituting court proceedings against the Bank and thus minimizing the Bank’s payment and remuneration to the initial and intended currency rates.
For more information and professional assistance on your CHF loan matters please contact Mr. Paris Hadjipanayis at [email protected]