Favorable ruling in the Swiss franc case!
The prevailing position in the jurisprudence regarding the invalidity of Swiss franc loan agreements containing unfair conversion clauses was also shared by the District Court in Warsaw in a case where our Law Firm recently represented Clients.
Below are a few words about Swiss franc loans and the problems associated with them.
Loans denominated and indexed to the Swiss franc are banking products that were most popular in Poland around 2008. Their main advantage was lower interest rates compared to złoty loans.
In indexed loan agreements, the loan amount was expressed in złoty. Such agreements stipulated that at the time of disbursement, the principal would be converted into Swiss francs, and the borrower would be obliged to repay the principal expressed in that currency. Despite the principal being expressed in Swiss francs, these agreements most often required the borrower to repay capital and interest installments in złoty. Consequently, the agreement also regulated the method of converting the installment, which was originally calculated in Swiss francs due to the currency of the loan principal, into złoty, which the borrower ultimately paid as the installment repayment.
The situation was somewhat different in denominated loan agreements, which were characterized by specifying the loan amount in Swiss francs. At the same time, similar to indexed loan agreements, denominated loan agreements stipulated that the loan would be disbursed in złoty. The borrower of a denominated loan did not know how high the loan was until the actual disbursement of funds, as it was only at the time of disbursement that it was known how the exchange rate applied by the bank to convert the loan amount expressed in Swiss francs into disbursed złoty had shaped up. For the purposes of further execution of the agreement, the principal amount was the amount expressed in Swiss francs, and based on this amount, capital and interest installments were calculated. Since borrowers of denominated loans were generally required to repay installments in złoty, the installment due in Swiss francs was converted into złoty.
Indexed and denominated loans in Swiss francs shared several features.
Borrowers of both types of agreements received the loan in złoty, but a very important aspect for the further execution of the loan agreement was the reference to the Swiss franc contained in it. In the case of both types of agreements, an important issue was the method of converting amounts expressed in Swiss francs into złoty. It should also be noted that such agreements often exposed bank customers to very high exchange rate risks, of which consumers were often unaware.
The controversies surrounding Swiss franc loan agreements have resulted in thousands of court cases that have been ongoing in recent years. An analysis of the judgments issued in these cases indicates that Swiss franc loan agreements were often defective, and the main reason for their defects was the unfair conversion clauses used by some banks. Unfair conversion clauses left the determination of the exchange rate to the sole discretion of the bank, which: (i) determined the loan principal (in the case of indexed loans), (ii) determined the amount of the loan to be disbursed (in the case of denominated loans), (iii) determined the capital and interest installments (in the case of both types of loans).