EU Court of Justice issues rulings in favor of borrowers with mortgages pegged with Swiss franc

The Court of Justice of the European Union CJEU) issued two rulings on Thursday in cases concerning loans in Swiss francs, an issue that affects thousands of Greek mortgage holders and has been the subject of extensive litigation in the country.

The CJEU stated, among others, that European Union law does not prevent consumers from demanding compensation from a bank in the event that a mortgage contract containing unfair terms is found invalid, in addition to the reimbursement of the previous paid monthly installments.

However, this law prevents banks from pursuing similar claims against consumers, the ruling added.

“(…) the possible recognition of the mortgage contract as invalid is the result of the use of unfair terms by the Bank. Therefore, it cannot be allowed either to derive economic benefits from its unlawful behavior or to receive compensation for the inconvenience caused by it.

The district court in Warsaw, Poland, had turned to CJEU with a request for a preliminary ruling and asked whether, in the event of invalidity of the loan agreement, banks and consumers may also demand other benefits.

The opinion, brought in a lawsuit filed by a Polish borrower, may provide a guide for similar loans issued in Greece.

Poland, along with many other European countries, including Greece, witnessed many borrowers over previous years taking out a mortgage linked with the Swiss franc, at a time when interest rates were low and the euro/franc parity favored the former.

When the franc rallied heavily against the euro, however, many borrowers were suddenly faced with massive monthly installments. The result was countless and lengthy lawsuits, some reaching national high courts.

The full EU Court opinion is here.