EU Court Backs Hungarian Consumers in Contract Snarl

(CN) – Tackling consumer-protection issues that the Hungarian Legislature has expressly ignored, the European Court of Justice ruled Thursday that national courts have a duty to study the fairness of contracts.

The ruling this morning stems from a loan that Terez Ilyes and Emil Kiss obtained a decade ago with a Hungarian bank. Although they were paid in Swiss francs, the couple agreed to make monthly repayment installments in Hungarian forints.

Those payments surged, however, because of considerable fluctuations in the exchange rate.

Ilyes and Kiss were responsible for these currency fluctuations under the terms of their contract, but the couple claimed in a 2013 lawsuit against OTP Bank Nyrt that such contract terms were unfair.

Dealing a blow to their case, Hungary adopted laws one year later by which it removed certain unfair terms from foreign-currency loan contracts but continued to place the exchange-rate risk on the borrower.

The Budapest Regional Court in turn sought guidance from Europe’s top court, the European Court of Justice — uncertain whether it could step in on a matter where the Hungarian Legislature’s inaction preserved the status quo.

Following input from Advocate General Evgeni Tanchev this spring, the Luxembourg-based court ruled Thursday that the Hungarian court has the power to examine the fairness of Ilyes and Kiss’ contract.

A copy of the ruling is not yet available on the court’s website, but a press release says “that it is for the national court to identify of its own motion, in the place of the consumer in his capacity as an applicant, any unfairness of contractual terms other than that relating to the foreign exchange risk, provided that it has available to it the legal and factual elements necessary for that task.”

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