site.btaConsumer Protection Watchdog Makes Deal with One Bank on Translation of Swiss-Franc-Denominated Mortgage Loans

Consumer Protection Watchdog Makes Deal with One Bank on Translation ofSwiss-Franc-Denominated Mortgage Loans

Sofia, November 21 (BTA) - Bulgaria's Commission for Consumer Protection said on Monday that it had reached agreement with one of the three banks which used to extend Swiss-franc-denominated mortgage loans to Bulgarian citizens on translation of the amounts due. The press release did not name the bank.

According to media reports, the three banks in question are UniCredit Bulbank, Eurobank Bulgaria (Postbank) and Piraeus Bank Bulgaria.

According to the agreement, all borrowers who have contracted loans denominated in Swiss francs will be able to have them translated, with the bank assuming 80 per cent of the foreign exchange risk at the time when the loan was contracted. This means that those who have been promptly servicing their loans will be treated as if they borrowed amounts in euro or leva. They will also pay preferential interest which is more lucrative than the rate charged from present borrowers, the Commission said.

The agreement also applies to defaulting debtors against whom writs of execution have not been issued. Those against whom enforcement proceedings have been instituted can assert their rights through the courts.

"The agreement was reached on terms which have not been achieved in any other country where this problem has arisen," the Commission pointed out.

Several banks offered loans denominated in Swiss francs some ten years ago, when these products were cheap. After the franc strengthened by some 50 per cent, however, these products appreciated substantially and put a heavy burden on clients. For this reason, the central bank demanded a discontinuance of this practice.

Last year the Commission for Consumer Protection analyzed commercial banks' standard contracts and determined that the unfair terms in the effective contracts for mortgage loans in Swiss francs must be removed. According to the principal unfair term identified, clients practically incurred the entire foreign exchange risk.