On April 25, the Polish Supreme Court delivered its ruling on the Swiss franc loan issue, which affected one in five mortgages in 2021. However, there is still a risk that the resolution will be overturned.
After 3 years of delay, 5 opinions from other institutions, and a change of judges, the Polish Supreme Court has passed a resolution on Swiss franc loans. This decision will be used to establish case law for borrowers and banks, each seeking a financial settlement from the other party.
The Supreme Court’s ruling deemed the clauses in bank loan contracts, which stipulate loan repayment would depend on the exchange rate of the Swiss franc, were excessive. This decision affects the 700,000 Poles who, between 2000 and 2012, took out a loan with a low-interest rate, but where the amount to be repaid, in the national currency, was indexed or denominated in Swiss francs.
The Polish Supreme Court’s decision on April 25 will make it easier for borrowers to take legal action against banks, as they felt wronged after the 2008 subprime crisis when the value of the Swiss franc skyrocketed and the zloty, the Polish currency, was devalued.
Some 130,000 holders of Swiss franc loans have taken legal action, after the number of monthly repayments had doubled in the wake of the crisis, committing them to a never-ending debt.
A complex legal process
The Court of Justice of the European Union (CJEU), seized by indebted Poles, was the first legal entity to issue an opinion on the subject, declaring in 2021 that the indexation of loans on the Swiss currency was excessive, as the loan holders had little understanding and above all little means of anticipating the volatility of exchange rates and interest rates.
However, it also stated that it was up to the national jurisdiction to confirm this assertion, as the problem was also present in France, Croatia, Greece, Hungary, Slovenia, and the Balkan countries. The banks in each country had assured their borrowers that the Swiss franc rate was stable and that it was a good deal.
Those now known as “Frankowitzes” in Poland probably have bitter memories of these promises, as the value of their property is now lower than the amount of their debt. The Financial Supervisory Authority (KNF) declared in 2020 that some 430,000 Polish loans had not yet been repaid.
Lawsuits are therefore likely to multiply now that the Supreme Court has removed the last concerns. Indeed, it has confirmed the European decision making it impossible to maintain or modify the banking contract and putting an end to borrowers’ repayments. Borrowers also have the possibility to demand compensation from the bank under certain circumstances.
Radoslaw Gorski, the lawyer who brought the borrowers’ first complaints before the CJEU, confided that “the banks were hoping for billions and they will most probably get nothing from consumers.”
Aggrieved banks hold out one last hope
According to the law firm Bochenek, Ciesielski & Partners, last year 97% of the lawsuits in this massive court case were won by the borrowers, much at the expense of the banks, who are still frustrated by the CJEU’s June 2023 prohibition on claiming compensation for unpaid monthly installments.
Tadeusz Bialek, President of the Association of Polish Banks, commented at a press conference that “this ruling leads to a situation where some bank customers (…) can get free loans,” while banks continue to claim that borrowers were fully aware of the repayment conditions.
For these banks, one hope remains: the annulment of the court decision. The validity of the court’s composition does indeed raise questions after the Supreme Court judges were replaced by “neo-judges.”
The “neo-judges,” comprising a significant portion—two-thirds—of the Court’s composition, were appointed by the government in power amidst a period of crisis for Poland’s judicial system.
These new judges are not unanimously approved, at least not by Attorney General Adam Bodnar, who asked the Supreme Court to exclude the neo-judges from this decision. This request, which was rejected, reflects the opinion of the former judges, who refuse to recognize the status of their colleagues and rule on this case with them.
Radosław Górski said he doubted the legitimacy of the ruling.“The resolution is benefiting consumers. However, its legality is another matter — doubts must be raised both by the composition of the court and by the way the Supreme Court ignored the Attorney General’s request to exclude judges.”
