PASOK: Proposal for a law to protect Swiss franc borrowers

PASOK tabled a proposal for a law to protect families with Swiss franc mortgages, after successive increases in interest rates by the ECB.

More specifically it states:

Explanatory Report

In the period 2006 to 2009, in our country, credit institutions granted 85,000 families housing loans in Swiss francs. As interest rates in euros followed an upward trend during this period, credit institutions, in order to continue the rapidly growing credit expansion at the time, attracted borrowers, offering, in view of the opposite course followed in the money market by interest rates in Swiss francs, mortgage loans in this currency. Thus, banks, when promoting loans in Swiss francs, focused on comparing their interest rate with that of loans in euros, glossing over or downplaying the imposition of the exchange rate risk exclusively on the borrowers. The latter, after all, had no experience with such products, given that up until then no foreign currency loans (housing or consumer loans) had been granted to consumers. Besides, the legislative framework for the protection of borrowers from the risks of loans in foreign currency was not sufficient, as was demonstrated by the EU recommendations and directives that followed for such loans and which have now been incorporated into national legislation. The fact, moreover, is that the credit institutions have never offered these borrowers any substantial possibility of hedging the exchange risk.

In the following years, however, the granting of these loans was followed by an unforeseen deterioration in the exchange rate that overturned any ratio of provision and consideration for the borrowers, leading them to a tragic impasse.

Because of the extreme reversal of the exchange rate these borrowers are now ultimately required to pay not only higher interest rates, but also to pay back a much larger amount of capital than they received and used to purchase their home. The result is that, despite almost 15 years of servicing these loans, usually of course through arrangements, the debts from the loans always remain high, in several cases even higher than the capital that the borrowers finally received and used. And the recent exchange rate developments worsen their position even further. This, in fact, while the future incomes with which these consumers expected to repay their loans, within a few years of taking them out, shrunk, and the great reductions in the values ​​of the properties in which they had invested their loans, they no longer allowed relief from debt even by selling them. The original loan servicing plan was overturned within a few years from every point of view, with the result that, without adapting the banks’ requirements to the new data, their repayment appears to be impossible, ultimately and without economic logic.

The above, of course, adverse developments had, of course, the result of starting a major legal battle of the borrowers that has not been vindicated to date. The critical court decisions, however, did not actually address the question of whether banks provided adequate information and guidance to customers or whether they were provided without the possibility of compensation. Having focused on consumers and their associations on the abusiveness of the exchange risk term, because it was not accompanied by sufficient information and enlightenment about the risks, the courts (Areios Pagos) ruled, for legal reasons, that the term cannot be checked if it is abusive. So, the borrowers’ belief that the State did not provide them with adequate and effective protection against an aggressive and dangerous commercial practice of the banks is justified.

This law proposal does not intervene in the disputes that have been caused regarding the observance of the rules of information and enlightenment during the granting of these loans or the issues related to the validity of the terms of the contracts. It does, however, take into account the fact that the reversal of the exchange rate against the euro took on such extreme dimensions that both contracting parties did not consider as a possibility at the time these loans were granted. In this context, however, the insistence on the application of an exchange rate that inflates the debt of the borrower beyond all economic logic and measure is particularly burdensome for the latter, and leads to a dead end situation for the borrowers that ultimately affects, in the end, the credit institutions, since it makes it impossible to service these loans. On the contrary, mitigating the consequences for borrowers will restore better repayment conditions, mitigate the disputes that have been caused and allow better servicing of the loans in question for the benefit of the credit institutions as well. In this sense the present arrangements organize and yield a fairer and more balanced distribution of risk. So:

It is recognized at the outset (regulated in par. 3) that the borrower bears, in respect of housing and consumer loans granted or converted into Swiss francs during the period 2006 to 2009, exclusively the risk of the exchange rate of euro to Swiss franc up to but the reduction of this to a percentage of 10% in relation to the price of the exchange rate at which the loan was disbursed in Swiss francs.

From the entry into force of the provisions of this legislative proposal, in the event that the deterioration of the exchange rate exceeds 10%, the exchange risk for housing and consumer loans granted or converted into Swiss francs during the period 2006 to 2009 is assumed by two-thirds from the creditor (credit institution or its successor) and by one-third from the debtor (first paragraph). The banks that included in their strategy of credit expansion and made available, under insufficient institutional conditions for the protection of consumers and without substantial hedging products, loans in Swiss francs now assume the largest share of responsibility. Thus, a Swiss franc loan disbursed in 2007 at an exchange rate of 1.62 and repaid at today’s rate of 0.98 will, by virtue of this paragraph, be repaid using an exchange rate of 1.41.

The second paragraph provides for the retroactive application to the specific contracts of an exchange rate more favorable to the debtor, which is set at half the price resulting between the exchange rate that existed when the loan was disbursed in Swiss francs and the exchange rate that was in effect at the time of the respective payment . Thus, the payments made to repay the debt with a lower exchange rate should be calculated based on this limit and therefore reduce the balance of the debt today. In case, based on the payments made, it appears that a larger amount has been paid than what was required to repay the loan, the creditor is not obliged to return the difference.

With the fourth paragraph it is ensured that the benefits of the above provisions will also be enjoyed by the borrowers, whose contracts have been terminated or their debt from them has been converted for any reason from Swiss francs to euros.

Finally, with the last paragraph, it is ensured that the regulations of this article do not affect and do not limit existing legal claims or rights of the borrowers from the conclusion of the loan contracts in Swiss franc, whether they arise from the terms of the contracts or, of course, from favorable for the same judicial decisions.

PROPOSAL OF LAW

“Protecting borrowers of Swiss franc loans from extreme exchange rate fluctuations”

Article 1

1. For the repayment of debts from housing and consumer loans that have been granted or converted into Swiss francs during the period 2006 to 2009, in the event that the euro/Swiss franc exchange rate (exchange rate of one euro for the Swiss franc) is at repayment time lower than that applicable at the time of disbursement or conversion, the exchange rate at the time of disbursement or conversion reduced by one-third (1/3) of the price difference it shows in relation to the exchange rate shall apply from the entry into force of this the repayment time.

2. For each payment that has been made for the repayment of debts from the contracts in paragraph 1 before the entry into force of this, a euro/Swiss franc exchange rate equal to the average value obtained between the exchange rate in force at time of disbursement or conversion and the corresponding exchange rate at the time of payment. The repayment of the loan is recalculated based on the exchange rate resulting for these payments pursuant to the first paragraph and the balance of the debt is redetermined. In case the payments with the new calculation exceed the payment of the debt from the contract, the creditor is not obliged to return the excess amount.

3. Paragraphs 1 and 2 do not apply while the euro/Swiss franc exchange rate was or is at the time of repayment lower by a percentage that exceeds ten percent (10%) of that in force at the time of disbursement or conversion or lead to the application exchange rate that is not lower than this limit.

4. The provisions of paragraphs 2 and 3 also apply to contracts of the first paragraph that have been terminated or the debt from them was converted for any reason from Swiss francs to euros, as long as they lead to a smaller debt for the debtor.

5. The provisions of this article do not affect or limit claims or rights of the borrowers from the conclusion of the contracts of paragraph 1.

Article 2

Starting Power

The provisions of the previous article apply from the publication of this law, unless otherwise specified by the individual provisions.

Athens, November 3, 2022

The proposing Members of Parliament

Michalis Katrinis

Evangelia Liakoulis

George Arvanitidis

Konstantinos Skandalidis

Nadia Giannakopoulou

Antonia (Tonia) Antoniou

Ilhan Ahmed

Christos Gokas

Georgios Kaminis

Charalambos Kastanidis

Vasilis Kegeroglou

Hara Kefalidou

Odysseus Konstantinopoulos

Dimitrios Constantopoulos

Andreas Loverdos

George Mulkiotis

Burhan Baran

Dimitrios Biagis

Apostolos Panas

George Papandreou

Andreas Poulas

George Frangidis

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