Unfair Contract Terms Directive, Article 3 Unfair Contract Terms Directive, Article 4 Unfair Contract Terms Directive, Article 5 Unfair Contract Terms Directive, Article 5

The reasonably cautious and informed average consumer could not reasonably consider that the currency exchange rate risk is not real, or does not burden him, based on the explanation he received.

The parties concluded a foreign currency-based loan agreement that was backed with mortgaged property. The repayment of the loan was conducted in HUF, but the exact amounts of HUF for each installment were calculated based on the current rate of exchange for the foreign currency (CHF in this case). During the conclusion of the contract, the plaintiff (the consumer) received and signed an explanation from the other party that this financial construct could lead to a significant increase in repayment due to exchange rate fluctuation. The plaintiff later alleged that these were unfair terms, he had not properly read the explanation, and that the various administrative fees imposed by the loaner were also unfair terms.

Whether the provisions concerning foreign currency exchange rate risk were unfair terms? Whether the provisions regarding administrative fees were unfair terms.

The Supreme Court found that based on available written evidence, the consumer was properly informed by the loaner as regards the currency exchange rate risks. It stated that such provisions are not unfair terms if they fulfill the criterion of both good faith and fairness, and if it is plainly intelligible to the average consumer (reasonably cautious and informed) that the foreign currency exchange rate risk hidden in the contract is real and the consumer is solely liable for it. The explanation provided by the loaner was found by the Supreme Court to be reasonably detailed, and documentation showed that the consumer had ample opportunity to study its contents and agree to it, thus it fulfilled the above conditions and these were not unfair terms. As for the administrative fees, the Supreme Court agreed with the Court of First Instance in that the consumer’s complaints were hardly appropriate, interpreting Article 3(1) of Directive 93/13/EEC to mean that a condition that does not make it possible to identify the exact services provided in exchange of fees, does not, by default, cause a significant imbalance to the disadvantage of the consumer in the rights and obligations of the parties, in opposition to the requirement of good faith. This was applicable to the current case, partially due to the settling of costs the loaner provided to the consumer, which the latter accepted originally.

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The Supreme Court upheld the judgement of the Court of First Instance.