Multi-currency mortgages: If they are not transparent, they are abusive. This is what the CJEU dictates

Last September, the CJEU (Court of Justice of the European Union) established the guidelines to consider a foreign currency mortgage (the multi-currency) abusive, concluding that the banking entities have the obligation to provide the client with sufficient information and understandable "so that he can make informed and prudent decisions". That is, if there is no clear and transparent information, it is considered an abusive clause.

The Supreme Court delayed until this October its expected failure on multi-currency mortgages, which more than 70,000 affected expect.

The origin of the multi-currency mortgage

A multi-currency mortgage is a kind of loan which allows payment in a currency other than the Euro (Dollars, Francs, Yen ...).

This financial product emerged between 2006 and 2009, a more favorable economic period. This type of mortgage was of interest to the consumer when the euro was a strong currency compared to others that had a lower interest rate in the euro zone . Given this difference in value, the monthly payment to be paid by the mortgagee was lower than that of a conventional mortgage loan.

In this way, these loans were commercialized and offered to replace the loan that already had the client, providing only a single information: the comparison between one or the other. Many consumers ignored the risks they were exposed to when signing them.

Lack of information, why the clause is considered abusive

This lack of transparency on the part of banks has led to a new judgment of the CJEU , which has established that this type of product is abusive if the consumer has not received sufficient information about the risks of its hiring.

The agency stresses that the borrower must be "clearly informed" when hiring a multi-currency mortgage because "it is exposed to an exchange rate risk that will be, eventually, difficult to assume from a point of economic view in case of devaluation of the currency in which it receives its income ".

In addition, it emphasizes the judgment on the case of a Romanian citizen who hired a mortgage in Swiss Francs with Banca Româneasca. The High Court of Oradea (Romania) took the case to the CJEU, which is now pronounced.