As of next week, bank customers will feel some tangible effects as banks are to repay income generated by unfair, unilateral modifications to contracts and by exploiting bid-ask exchange rate gaps, Minister for National Economy Mihály Varga said at a press conference in Budapest.
The Minister also stressed that the verdict of the Constitutional Court, delivered on January 2015, confirmed that the law on the compensation of banks’ clients is in harmony with the Basic Law of Hungary, therefore its implementation cannot be bypassed by legal bickering.
The Minister pointed out that under the phasing out of forex loans the volume of loans exchanged into forint-denominated facilities totalled some HUF 3600bn, which measure has shielded the homes of half a million families from extreme, unpredictable exchange rate fluctuations.
These modifications may involve as many as 2.4 million contracts at banks and 3 million contracts at financial enterprises. Financial institutions are thus set to face huge logistical and technical challenges; for example the letters to be handled at a large bank are estimated to weigh some 16 tons. However, banks are prepared to fulfil their tasks; some of them have even upgraded their informatics systems.
Forex mortgage borrowers are scheduled to receive information letters from financial institutions detailing compensation and the forint conversion between 2 March and 30 April, Mihály Varga explained.
Forex borrowers will be the first to receive information letters, including those with a loan contract that has already expired following June 2009. Borrowers whose contracts have already been terminated will also be informed and compensated. Those who do not receive a letter until the end of April are to turn to the banks.
These letters must clearly state the amount of compensation to be repaid to the customer or subtracted from the existing amount of debt. The law also obliges financial institutions to word letters in a comprehendible style. The letter must also reveal how much is still left of the total debt following the compensation, the rate of interest to be paid, tenure and monthly instalments.
In case of loan contracts which have already expired the compensation amount must be repaid, while in case of existing loan contracts monthly instalments must be reduced.
Financial institutions are required to use calculation methods of the National Bank of Hungary for the reckoning of the compensation amount.
Mihály Varga called attention to the fact that forex loan facilities have been extremely complex financial products; therefore the amount of compensation must be calculated on a case-by-case basis for each contract. In the estimation of the Ministry, the amount of compensation will average 25 percent of instalments, which will in practice vary between 10-40 percent, depending on interest rate and exchange rate adjustments. Accordingly, on-line calculators may only provide a rough estimate.
As there may be glitches in such a large-scale data processing operation, clients are advised to double-check personal and contract data, among them the amount of former instalments, interest rates and tenure. In case a customer questions the adequacy of calculation, he/she is entitled to submit a letter of complaint to the financial institution within 30 day of receiving the letter on compensation and the institution is obliged to respond to that within 60 days. If the complaint is turned down, the customer may file a claim at the Financial Arbitration Board of Hungary.
(Ministry for National Economy)
