From White Baos we have helped and continue to help those affected by multi-currency mortgages in Spain, in order to claim against the banks for the partial or total nullity of these contracts.
In a number of the cases studied, it appears that some banks did not duly inform consumers about the effects and potential risks of loans offered in a foreign currency, mostly Swiss Francs and Japanese Yen although there are others.
This lack of sufficient clear and truthful information means that there a defect in the consent, i.e. if the consumer was properly informed about the risks of the product, potential costs, expenses, etc., they would not have contracted to that product, since these loans are extremely dangerous and risky because the value of the money to be paid back depends on the foreign exchange market which is often volatile, unstable and unpredictable.
In addition, all multi-currency mortgage loans signed in Spain that we have been able to review contain clauses that are not transparent, since the multi-currency clauses do not provide a clear and understandable explanation of the real risks of borrowing in a foreign currency.
In this regard, we would like to highlight the decision of the Court of Justice of the European Union (ECJ) of 20 September 2017 in Case C 186/16.
This judgement establishes that the European directive 93/13 requires that the multi-currency clauses are clear and understandable, which means that in this type of contract, the consumer must have had explained and be made to understand that the loan is in a foreign currency and should be re-paid in that currency.
It makes it clear that the contract should be drafted in such a way that the borrower understood both the possibility of appreciation or depreciation of the foreign currency and its potential economic consequences, which in these contracts can be very significant.
In addition, it points out that any claim should assess whether at the time of signing the contract that the bank explained to the consumer at the time of signing the mortgage loan contract referenced to a foreign currency, the possible changes in the currency exchange rate, their possible risks and clarity of the loan.
Thus, multi-currency clauses must be transparent, to overcome the so-called transparency judgment, similar to what happens with the mortgage floor clauses, making it evident for borrowers to understand that the risks inherent in a multi-currency clause are very complicated for anyone who is not an expert in the foreign exchange market, unless the bank has made an effort to make the consumer understand the high risk of the product, which unfortunately has not happened, at least in the cases which we have been dealing with.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Carlos Baos (Lawyer)
White & Baos
Tel:+34 966 426 185
E-mail: info@white-baos.com
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