The Nicosia District Court recently granted an interim order for the freezing of a borrower’s installments in Swiss Francs (CHF).
The lawsuit was filed by a borrower and a guarantor and concerned a loan which was granted back in 2007, the installments of which were paid without any delay until May 2015 when the borrower realized that the installments were increasing instead of decreasing.
One of the objectives of the borrower was to declare the loan null and void as a result of the failures of the lending bank; namely the bank’s failures to extensively warn the borrower regarding the risks associated with a foreign currency loan.
The Court concluded that the principle of transparency was undermined since the calculation of the interest rate in a foreign currency loan was different to that which is calculated based on the Euribor and which applies to Euros, and a as a result the borrower did not have clear calculations regarding the repayment of his loan.
Effectively what the Judge said was that the terms and conditions of the Swiss Franc Loan were ambiguous, not clear and were not enabling the borrower to calculate the actual outstanding amounts, the loan installments and the final amount to be paid.
What is more important however is the fact that the Judge had adopted the recent decision of the European Court of Justice (C-26/13, Árpád Kásler and Hajnalka Káslerné Rábai vs. OTP Jelzálogbank Zrt) in which the Court had ruled that “the contract should set out transparently the specific functioning of the mechanism of conversion for the foreign currency to which the relevant term refers and the relationship between that mechanism and that provided for by other contractual terms relating to the advance of the loan, so that that consumer is in a position to evaluate, on the basis of clear, intelligible criteria, the economic consequences for him which derive from it.”
Finally it is worth noting that the interim order was issued on the grounds that the borrower has very good prospects to be successful in his main claim when it comes before the Court.
If you are encountering any issues with a Swiss Franc Loan in Cyprus, or are unsure of your legal options, please don’t hesitate to contact us for a confidential no-obligation no cost initial discussion.