The legal issue on banking: status report

HUNGARY - In Brief 14 Sep 2014 by Istvan Racz

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Fact: The government's legal initiative against domestic banks, regarding household loans, is moving ahead with full steam both in the courts and in further legislative work. Recent key events are the following: (1) Courts have issued first-instance rulings so far on 29 out of a total 79 cases initiated by domestic banks and other creditors against the State of Hungary. Creditors are fighting the legal assumption, determined by a recent parliamentary act, that their lending practices regading loans granted to households between May 2004 and July 2014 were unfair in respect of unilateral contract amendments. Out of the 29 cases where decisions have been issued, the courts ruled fully against creditors in 24 cases. In 3 cases, lending practices were ruled partially unfair (i.e. generally unfair except for certain loan products in limited periods). In the remaining two cases (including that of OTP Bank), the courts suspended the procedure and asked the Constitutional Court to nullify certain provisions of the parliamentary act, on the basis of which all the cases in question have been initiated. (2) The government and Fidesz' parliamentary faction approved last week a draft law on how creditors should pay compensations to household borrowers with regard to unfairly charged currency conversion spreads on FX loans and to unfairly implemented unilateral contract amendments on FX and HUF loans. Importantly, the draft slightly extends the list of recipients compared to expectations, authorises the MNB to issue regulation on the method by which the amount of compensations are to be calculated, and postpones the payment of compensations to 2015, against previous official stateme...