Those affected by unfair terms in a mortgage loan can claim more compensation from financial institutions than the restitution of the cash consideration, according to the conclusions of an advocate general of the European Court of Justice, which in contrast denies this right to banks.
The Advocate General’s conclusions – which are not binding for the future judgment but in most cases set the direction for the final ruling – argue that this is possible because the purpose of EU law is to “grant a high level of protection to consumers” and may also “dissuade” banks from entering into such contracts.
The case concerns two Polish citizens who signed a mortgage with a bank in their country to build a house that was denominated and paid out in Polish schlotis, but indexed in Swiss francs.
The clients sued their bank on the grounds that the terms of the mortgage contract were abusive in the sense that the instalments were received by the bank “without any legal or contractual basis”, and that the bank had profited from them.
Those affected understood that this fact rendered the contract null and void and claimed compensation for having used their money without contractual basis, but also for losing the possibility of earning income due to the “temporary inability” to use their own money and for the reduction of the purchasing power of the resources they had transferred to the bank.
In his Opinion, Advocate General Anthony Michael Collins responds to the doubts of the Warsaw District Court- Śródmieście that Community law “does not preclude national legislative provisions which allow the consumer to pursue claims which go beyond the reimbursement of the loan instalments paid (…) and the payment of default interest at the statutory rate accrued from the date of the order for payment”.
Even so, he adds that it is for the Polish court to ascertain whether its national law gives consumers affected by unfair mortgage terms the right to pursue “such claims” and, if so, to “rule on their merits”.
The lawyer argues that a clause that has been declared unfair “does not produce binding effects on the consumer”, therefore, the client “must see restored the factual and legal situation in which he would have found himself if that clause had not existed”.
It also stresses that the fact that those affected can claim damages in excess of the amount of the loan “may constitute an incentive for borrowers to exercise the rights conferred on them by the Directive, while at the same time discouraging banks from introducing unfair terms in their contracts”.
As regards the possibility for banks to exercise “similar claims” against consumers, the Advocate General denies this right to financial institutions because the nullity of the contract is a consequence of the bank’s inclusion of an unfair term in that contract” and “a professional should not derive any economic benefit from a situation created by his own wrongful conduct”.