In a verdict issued on December 14, the Court of Justice of the European Union (CJEU) disarmed banks in their battle against Swiss franc loan holders (frankowicze). This effectively dismantled the concept proposed by some judges regarding the method of calculating the limitation periods for bank claims. The court confirmed that basing the start of the expiration of claims from a business on actions taken by the borrower during a court proceeding is not in alignment with Directive 93/13 regarding unfair terms in consumer contracts. This would result in a significant imbalance in the rights of the bank and the borrower, especially because the borrower’s claims begin to expire from the moment they discovered that their contract contains unfair terms. The CJEU believes this could encourage a business to remain inactive or prolong the phase outside the court after a consumer complaint, in order to let the consumer’s claim expiration period pass before the business’ own claim period even begins.
Obviously, if the borrower first calls the bank to refund the paid installments referencing the invalidity of the contract, and then files a lawsuit insisting that the contract is null and void, it should serve as enough indication to the bank that they do not wish to “rectify” the loan agreement and keep it valid. Thus, when the bank becomes aware of this, the limitation period for claims for capital return begins for the bank. The opposing concept would lead to a situation where a company offering unfair contracts would be entirely exempt from liability for the effects of these contracts until a consumer takes active steps to challenge the contract and claim their rights. Furthermore, it is completely incompatible with consumer protection principles to burden the borrower with the obligation to take these claims to court. The consumer should be protected against unfair bank practices by law, regardless of their awareness and knowledge. Making the emergence of legal consequences unfavorable for banks dependent on borrower actions, such as filing a lawsuit, could lead to banks’ impunity and profiting from their unlawful actions. The lack of perspective of expiry of claims for capital return would nullify the deterrent effect of Directive 93/13, which is intended to discourage banks from using unfair clauses in loan agreements.
In its ruling, the CJEU also touched on the issue of stoppage allegations raised by banks during proceedings. If such an allegation is accepted by the court, it would mean that the bank can withhold compliance with a borrower’s payment request until he or she provides or secures funds for payment to the bank. As a result, the bank is freed from the effect of delay, meaning the borrower is not entitled to interest for that delay time.
It should be noted that Swiss Franc lawsuits currently last several years, and the stoppage plea is often brought up by banks a few days before the appeal hearing. This leads to a situation where banks can potentially exploit the long duration of the process without paying any interest. On this matter, the CJEU took a categorical stance stating that UE regulations are against any interpretation of Polish regulations that causes a borrower to lose right to interest from the payment due date as a result of a stoppage plea made by the bank.
Commenting on the recent events in the CJEU, mention must also be made of one very important ruling, delivered on December 11 in case C-756/22. In this case, the court unequivocally ruled that banks cannot demand any indexation, finally and unequivocally confirming that if a loan agreement is declared invalid, banks are only entitled to a return of the nominal value of the capital, plus interest from the request of the borrower to pay. From today’s ruling in case C-28/22, it follows that these claims may expire if the bank does not undertake active steps to recover them.
Borrowers no longer need to fear taking action against banks in court. However, it must be remembered that just as bank claims become time-barred, so do borrower claims – we can’t procrastinate indefinitely.
Author: Izabela Libera – Legal Counsel
