In Hungary, foreign currency-based loan contracts became popular in 2006, as they were available at significantly lower interest rates than their forint-based counterparts. However, during the 2008 financial crisis in Hungary, debtors who had previously signed a foreign currency loan contract (most typical case was the Swiss franc loan), found themselves in an extremely difficult situation, due to exchange rate fluctuations and the crisis. Many families' repayments have tripled, leading to mass foreclosures.
The Hungarian Government responded to the situation in 2011, when it introduced a cap on the exchange rate and a moratorium on evictions, and in 2014, it also converted mortgage loans into Hungarian Forints. When problems with foreign currency loans emerged, debtors started to sue Hungarian financial institutions in droves. The essence of these lawsuits was to claim that certain financial institutions had failed to adequately inform debtors of the risks involved in taking out a loan in a foreign currency. In addition, the debtors also argued that the exchange rate risk could not be unilaterally transferred to the consumer in such a case, and as such, the contract was null and void due to these circumstances.
Both the Hungarian case law and the legislation subsequently enacted because of these lawsuits sought to ensure that these contracts remained valid. As a result, debtors have lost a series of lawsuits. However, the above situation has changed dramatically with the decision of the Court of Justice of the European Union in a foreign currency leasing contract case from 2007. The Hungarian Curia referred the case to the Court of Justice of the European Union to clarify the extent to which Hungarian case law and legislation are in line with European case law.
The Court of Justice ruled on 5 May 2025 that the contract was invalid due to the lack of information about the exchange rate risk and that the full amount of the monthly instalments and costs paid would be returned to the debtor.
The impact of the decision is currently unknown, but the case has received a lot of coverage and comments in the Hungarian media. Many expect the ruling to reignite litigation on foreign currency loan contracts, but it is not yet known whether and to what extent the Hungarian courts will change the case law as a result of the ruling.
By Bálint Éberhardt, Attorney at Law, KCG Partners Law Firm
