What Will Banks Need To (Re)Pay Their Borrowers?

1 Background

In recent years, bank customers in Hungary have initiated numerous litigations claiming that their loan agreements are illegal, invalid, or null and void for a variety of reasons. Mostly, these reasons centered on the legality of the application of spreads in FX-based loans and on the validity of the unilateral amendments applied by the banks regarding fees and interest rates.

The Hungarian Supreme Court, taking notice of the fact that lower courts are in a grave need of a guideline, issued a ruling on 16 June 2014 on the validity of spreads and unilateral amendment provisions incorporated into loan and leasing agreements entered into between financial institutions and consumers. The Supreme Court ruling, which is binding on lower courts, (i) renders the spreads on such loan and leasing contracts null and void, and (ii) sets forth criteria under which a unilateral amendment of such contracts by the financial institutions (i.e. amendments