Change in case-law in favour of consumers - recipients of credit in Swiss francs (CHF)

On 20 September 2023, the Supreme Court of the Republic of Slovenia issued a judgment and a decision in Case No II Ips 54/2023, by which, inter alia, it found that a credit agreement granted for a loan in Swiss francs (CHF) to consumers is null and void.

The Supreme Court of the Republic of Slovenia based its decision, in particular, on the conclusion that the bank had failed to fulfil its duty to provide explanations in accordance with the requirements of professional diligence. The bank should have ensured that the credit borrowers, as consumers, were made aware of the actual consequences of major currency fluctuations, whereas instead there was an uneven distribution of risks to the marked detriment of the credit borrowers, which the Supreme Court of the RS considered to be an unfair practice.

Based solely on the explanations received, the Supreme Court of the Republic of Slovenia considers that the credit borrowers could not have been aware that the risk they were exposed to by entering into such a business relationship was very high. The bank must provide such information as would lead the average consumer not only to be aware in the abstract of exchange rate fluctuations and the possibility of changes in the amount of the instalments of the credit, but also to be aware in the concrete of the actual consequences of a large depreciation of the domestic currency (and of the increase in foreign interest rates) on the amount of his credit obligations for the entire period of repayment of the credit. Not only that, but the bank must also inform the consumer of the economic circumstances which could affect exchange rate fluctuations, thereby enabling him to understand in concrete terms the potentially serious consequences which the conclusion of a foreign currency loan could have on his financial situation. It is not enough for the consumer to be aware, on the basis of the bank's explanations, of the possibility of changes in the exchange rate, but it is also necessary to make it clear to him that the exchange rate, particularly in long-term contractual relationships lasting several decades, can change significantly and that this can have non-negligible negative economic effects - something which the bank has failed to do.

The insufficient explanatory duty violates the principle of good faith and fair dealing and creates inequality between the contracting parties, which led the Supreme Court of the Republic of Slovenia to consider the disputed contractual terms of the credit agreement unfair and, in accordance with the provisions of the Consumer Protection Act, void. The Supreme Court of the Republic of Slovenia further held that the entire credit agreement was null and void on the ground that the disputed contractual terms constituted a central element of the contract.

This is one of the decisions that is essential to overturn the previous case law, which, despite the efforts of lawyers, was extremely favourable to banks and to steer the case law of our courts in favour of the credit borrowers who, on the basis of the banks' assurances (and insufficient explanations), opted for seemingly attractive Swiss francs (CHF) loans. The latter had extremely negative financial consequences due to the huge increases in credit instalments, as consumers disproportionately overpaid or continue to overpay for the loans.

With the above mentioned decision, the Supreme Court of the Republic of Slovenia has opened the way for other consumers to request the annulment of credit agreements for Swiss francs (CHF) loans and, under certain conditions, the repayment of overpaid credit and the termination of the lien securing their claims.Our lawyers are already advising affected consumers on how to find a comprehensive solution and how to approach the case as efficiently as possible.