CJEU backs consumer compensation for unfair mortgage terms

Julien Warnand/PAP/EPA

The Court of Justice of the European Union (CJEU) ruled in a judgment announced on Thursday that consumers can demand compensation from banks beyond the reimbursement of monthly installments paid if a mortgage contract with unfair terms is declared invalid.

The tribunal added that "by contrast, it precludes the bank from relying on similar claims against consumers."

Case reference C-520/21 concerns remuneration for the use of capital after cancellation of a Swiss franc loan agreement and was brought up by a Polish court questioning CJEU about the matter.

On the one hand, the question was whether banks could demand from the consumer any other benefits apart from the return of the paid-out capital and the payment of statutory interest for delay from the time of the request for payment, and on the other hand, whether banks could pursue claims that go beyond the reimbursement of monetary benefits.

The ruling, although widely expected, is a blow to the Polish banking sector and ends the banks' practice of demanding "use of capital" payment from FX borrowers who have won court cases against them. A large number of customers have been able to win such cases owing to the lenders' use of abusive clauses in their FX mortgage agreements with them.

Although Polish banks ceased to offer FX-denominated mortgages in 2012, the outstanding loans of around PLN 130 billion (EUR 28 billion) still pose a risk to the Polish banking sector as customers sue banks for damages in courts. Most FX loans were mostly denominated to the Swiss franc when the Polish national currency was strong, but later on the franc appreciated rapidly, leaving the customers with extensive debt to pay off.

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