Penatigyi Ismoretterjeszté és Erdok-képvisetet Euyestilet European Commission Cabinet of Commissioner Véra Jourova Renate NIKOLAY, Head of Cabinet Rue de la Loi / Wetstraat 200 1049 Brussels Belgium Breach of Union taw by Hungary 2014. December 17. RN/, Ares (2014) 4003572 Dear Ms Nikolay, Further to your letter of 27 November 2014 conceming the laws recently passed by the Hungarian Parliament that require banks to compensate foreign-currency loan holders, we can confirm that, among other things, the Hungarian provisions oblige banks to return any gains resulting from the practice of charging an exchange rate when converting repayments into foreign currency that is higher than the exchange rate they applied when disbursing the loan in Hungarian currency. This legislation fundamentally violates the doctrines of fair trial and the separation of powers, First, the banks applied an additional cost element to the loan agreements by using different exchange rates (a so-called ourrency-spread) but failed to inform the consumers of these costs. Additionally, the banks manipulated these costs during the lifetime of the contracts without notifying the consumers. We analysed the applied currency-spread of the major Hungarian banks in 2011" and found evidence that all of the banks had secretly raised this cost element between 2005 and 2010. Hiding and manipulating costs in consumer loan agreements are serious violations of European consumer protection standards. The Hungarian regulator, PSZAF knew * Report on foretgn-curency lending practices (Hungarian) (2041.11.11) - hntpitee wordpress com2011/* fea fogyasztovedekni-clemzes-anitlintezstek-es-penzugyt-vallalkazasok- evizahitelezest-gyakoriatarl-2000-20081 Pentiny: moreteqeseto er Ere epee Egy wrschurn Roch Det ti 208 Fetus auth, Ein ni sePénziigyi Ismeretterjeszt6 és Erdek-képviseleti Egyesiilet ITE vertauchirc uve Fe PITEE Conner Foti Assocs for about the banks’ wrongdoings but never objected. These and other wrongdoings of the banks provide sufficient grounds for consumers to challenge the validity of their loan agreements. Second, the laws recently passed by the Hungarian Parliament oblige banks to return any gains resulting from charging different exchange rates. According to the doctrine of the separation of powers, it is not within Parliament's competence to determine the legal consequences to be applied if the banks breached the law. If the banks did breach the law, the consequences specified in the law in force at the time the breaches were made are to be applied. if the banks and consumers are in disagreement about the legal consequences, their disputes must be decided by independent courts in fair trials. It is unacceptable that Parliament assumes the role of the judiciary, and itis also unacceptable that the law is applied at the discretion of a temporary political majority. Third, the laws recently passed by the Hungarian Parliament contain various measures to deny court trials to consumers. Ongoing court proceedings have been stopped, and claimants are being forced to abandon their claims. Additionally, new court proceedings are being established to deal with consumer protection matters. These new court proceedings are regulated in such a way that consumers are prohibited from participating. We are not aware of any other EU member state that has introduced such legislation against consumers. (On the basis of the above, we are submitting this complaint on behalf of approximately 500,000 consumer mortgage debtors. It is our opinion that Act XXXVIII of 2014 and Act XL of 2014 of the Hungarian Parliament are in breach of Article 2 of the Treaty on European Union’, Article 169 (ex Article 153 TEC) of the Treaty on the Functioning of the European Union* and Article 47 of the Charter of Fundamental Rights of the European Union‘. These new Hungarian laws interfere with private law matters and deny debtors legal recourse to the courts 2 hitp:feurtex europa eulega-contenVENITXT/Pur=CELEX:12012M/TxT 3 hitp:leuiex europa oulega-contenENITXTIZur=CELEX 12012E/0XT “ hitpafeurlex europa eulgal contentIENIXT/?urisGELEX:12012P/TXT noi Isereteneszt@ toe for Hn f5Hecisaqal” in Gorman, ane a Soll Ean nt Wale, énzogyfomovetejeszto cs Erdek-hepwsea Egresiel (PITEE) Isl cit unsbhangig lusprtenem Rech Dot Voroin wide in 28 yuyinel, Der Wrsazeede ht Th Heetasmwalt in Daten, Ed el Wa set Eyes PITEE) an inopenet consume pectPénziigyi Ismeretterjeszté és Erdek-képviseleti Egyesiilet Heats P PITEE Vsrvancharchuse i Fhsneoststngen PIIEE Consrer Protection Ascii fr Franca Severs 1. Description of the suspected infringement of Union law Approximately 500,000 consumers have foreign-currency loan agreements with banks. The banks did not observe the minimum consumer protection standards either when the foreign-currency loans were concluded or when their costs were unilaterally ‘modified. There are a number of strong arguments in favour of the consumers to challenge the validity of their loan agreements, In a decision of the Hungarian Supreme Court (Kiiria) dated 4 July 2014, the court admitted that a loan agreement is void if the bank did not inform the consumer of all of the cost elements attached to the loan agreement. According to the Hungarian Minister of Justice, approximately 12,000 consumers® had filed court claims against the banks as of July 2014 and asked the courts to declare the loan agreements void, The laws recently passed by the Hungarian Parliament aim to prohibit consumers from challenging the validity of their agreements. Acting at the request of the Government and the courts, the Hungarian Constitutional Court has delivered various decisions that approve the above legislation, The Hungarian Constitutional Court is of the opinion that amending private law agreements by an act of legislation does not violate the doctrines of fair trial and the separation of powers® 4.1. Specific national measures that you believe to infringe Union law The following measures of the Hungarian Parliament and the Hungarian Constitutional Court infringe Union law, especially Article 47 of the Charter of Fundamental Rights of the European Union: = Decision 8/2014. (III. 20.) of the Constitutional Court; - Decision 34/2014. (XI. 14.) of the Constitutional Court; * niin kormany buldowrloade8/10000/201400' 1%420TLY620ABW20Iev%CKADL dt 6 Section 90 ofthe Decision 8/2044, I, 20) of the Cansttaional Court Fadekhépnit Egyesife (PEE) san impel consumer protection ansiation| nla, Te aso ns 7008 Th Chun Ts Ox Dunc aay He fsa cinsrelteeseto 62 Exdek hepacke Eres vem Rech Dat Yai nd in 2008 gen rns ntsc, wt Wes TEE) et ein unabhingiger nbc ot Dat Worazever is Denes LavaPénziigyi Ismeretterjeszts és Erdek-képviseloti Egyestilot cosas to raat ~ Act XXVIII of 2014 on the Settlement of Particular Issues Related to the Uniformity Decision of the Supreme Court (Curia) on Consumer Loans Provided by Financial Institutions; and = Act XL of 2014 on the Compensation of Consumers, 1.2. List of documents in support of this complaint The following documents support our complaint: ~ Report on foreign-currency lending practices (Hungarian) (2011.11.11)" ~ Press releases of PITEE (2011-2014)° ~ Constitutional Complaint to the Hungarian Constitutional Court (Hungarian) (2014.09.18,)° 2. Appeals/Legal Actions/Other Actions 2.1. Actions to solve the issue in the member state We support consumers who file constitutional complaints with the Hungarian Constitutional Court against the above legislation. We are aware that such complaints have poor prospects for success in light of the above decisions of the Hungarian Constitutional Court. Such complaints, however, are obligatory in order to comply with | the admissibility criteria specified in Article 35(1) of the European Convention on Human Rights. 2.2. Contacts with EU institutions We have sent the above-mentioned press releases to the offi Central Bank, members of the European Parliament and officials of the European Commission. The only response we have received so far is your letter of 27 November 2014. * naples worepress.comiengishvpressceviw! * nlm cribd.comidoe/240 125058120409 18.PITEE-AB-ABotmanylogl-Panasz-2-Bankmento-Toreny-Elen ‘penzugylwvalakozasok- silet (PIE) Is depend contin protection arsocitc any, nd = Slr Eran and Wales, (0 Etdetekepuisalet Egyestiet (PTE) iat en enabhngiger ht Dot Verio woxde 1 2000 gomiet, Der Voraizentoy Rt Dr Dane vi etch, Ey hdPénziigyi Ismorettorjeszt és, Erdek-képviselot Egyesiilet TEE Vrbausherelwizvetel fir Fhanxsanstangen pate are 1068 PITEE Genoumer Fett Aenean fr Fa Serve 3. Confidentiality — Data Protection We authorise the Commission to disclose our identity in its contacts with the authorities of the EU country against which we are lodging a complaint. Yours sincerely, Vv Ke Denes Lazar pitee2008@amail.com www pitee.org Pings Isnerelenmack #8 Fuel-kepmiaiti Eyestte (PEC) i an indepandst const nti nr Parga The asses a land 02008. Te Clk DOr Lavan He fs" Rechtsaiallin Germany, nd a6 Soliton Engatoad and Wale. folleensts 2 Endeklepiaciet Penzoaye fet (PITEE) st oy unabhangiger Vrbrauehorschatzarcin nach Tinga, Fee Dot Moran winds in 2008 ely, Do Warzone st Oy, Danes az Cit zoel Feces outs, oq Wee