On Thursday FX loan holders attempted to call the government’s attention to their hopeless situation by closing Budapest’s József Attila street. Many are saying they have had enough and are not going to repay the amount they borrowed many times over. Clients can register their complaints with their banks providing they can precisely identify the error made in calculating the balance owed. However, the detailed calculation they have received often runs to hundreds of pages and is incomprehensible to anyone who is not a financial expert An expert for the Bank Loan Victims Association (Banki Hitel Károsultjainak Egyesület) believes there is going to be enormous trouble over this.
Dazed and confused
Despite their combined debt being decreased by some HUF 650 billion, a number of FX loan holders were astonished to receive the long-awaited calculation of interest refunds and adjusted loan principle from the bank as mandated by last year’s debt relief act. To their disappointment and outrage the amount of the refund is far less than what they were led to believe on the basis of the government’s earlier communication. While true that on average what they owe the bank decreased 17 percent, the government had previously mentioned debt reduction of between 20 and 30 percent. This was to be in addition to a refund of interest that had been “unethically calculated.”
Some one and a half million FX loan holders are in the process of learning how much (or how little) money is to be refunded to them, how much they still own, the conditions of the new forint loan and the amount of the monthly debt service moving forward. It is possible to obtain a waiver from the obligation to convert FX loans into forint-denominated ones but the conditions are rather strict.
For many, the biggest problem is that they cannot even understand the calculation received from the bank. This may be due, in fact, to the complicated method by which the financial reconciliation is to be calculated, and in some cases the financial institutions may not have been able to complete this task without making mistakes.
The National Bank of Hungary (MNB) continuously inspects the banks with regard to the method of calculation. Furthermore, it is investigating whether there are any grounds to rumors that certain lending institutions or financial companies raised the level of the exchange rate threshold when calculating the monthly debt service of certain customers.
Presently, the ball is in the debtors’ court, although six financial institutions have yet to post the letters due to drawn-out litigation. Customers who are dissatisfied with the new forint interest rate offered by the bank have sixty days to terminate the loan agreement. In those cases, from the time the loan agreement expires, the debtors have 90 days to find a new bank. The procedure is free as the financial institutions are not allowed to charge customers any fees for the transactions.
According to daily online index.hu, a number of credit institutions probably assumed that a majority of debtors will not opt to refinance their loans. One reason for this is that brokers have been excluded from the process, although they may offer advice free of charge. Another reason is that few debtors qualify to avail themselves of the opportunity, in many cases having already defaulted or fallen into arrears on the original loan.
Customers are not required to accept the calculation, in which case they must request a detailed explanation from the financial institutions. Once they have done so, those who believe that something is not right have the right to formally complain to the bank. If the financial institution rejects it, then a legal remedy can be requested from the Financial Reconciliation Body attached to the MNB. Those who are not satisfied with that can turn to the courts.
Many are already thinking in terms of the latter. Many will only accept the bank refunding all losses arising from the change in the exchange rate, which is inconceivable in light of the decision of Hungary’s highest court, the Curia.
Anyway, the FX debt relief act does not require that the banks eat all the losses while relieving debtors of their debts. Instead, it involves decreasing monthly debt service payment obligations while eliminating changes to principle owed as a result of exchange rate fluctuations. The same does not apply to interest payments, however, which may fluctuate depending on the interest rates set by the central bank.
FX debtors prepared to fight
Embittered FX debtors held a day-long demonstration in the Széchenyi square on Thursday. They believe the FX debt relief act itself to be unethical and that the banks and the state derive all the benefits while the customers suffer all the losses. Referring to an earlier Curia decision, they believe that there was no hard currency behind the loans that were disbursed in forints and demand that the law be invalidated. Until then, they refuse to pay the “thieving” banks and refuse to give up their homes.
Most have yet to get over the shock. They do not understand how they can owe more than what they borrowed to begin with, when they have already repaid the original amount, if not more. The “Radical Anti Bank Group” and the “ I won’t give them my house” movement organized an event next to the Budapest Sofitel Hotel where victims could attest to just how hopeless their situation has become by recounting their own experiences.
One of the demonstrators said that they themselves want to participate in the framing of a law. “We need to free ourselves from the government because it is not representing our interests,” said one of the speakers. In response, someone shouted “if they can help the Quaestor victims, then why can’t they help us?” A number of speakers recounted how acquaintances committed suicide because they did not see any other way out of their debt trap.
The one FX loan holder recounted how eight years ago he borrowed HUF 7 million denominated in Swiss francs. According to the calculation he received form the bank, he has already paid HUF 7 million but owes HUF 17 million. He is expected to repay this by paying HUF 88,000 a month for the next ten years, which is somewhat less than before, but he has to repay HUF 6.3 million two months before the rest of the loan comes due. “This is completely absurd. How do they imagine it?” he asked, even though he is considered to be a “good debtor”.
Barely 200 showed up for the demonstration which was scheduled to end at 4 pm. Many said the reason so few attended was because many cannot afford to travel to Budapest from the countryside.
One of the organizers, who borrowed HUF 14 million but now owes HUF 48 million, said the protesters had hoped to deliver a petition to parliamentary Speaker Lászlö Kövér in person, and while they were assured over the telephone that he would receive it, in the end this did not come about.
In the petition, they write, among other things that “We promise, that until this problem, which affects the entire country, is resolved effectively we will continue, and we will fight with every means and on every front until our truth is revealed.”
More than 20 calculations are attached to the petition, which contains the following demands:
- We demand the basis for the reconciliation with the banks be exclusively the currency and amount wired to the customer’s account (and not the foreign currency in which the loan was denominated-ed.)!
- We demand that the financial institutions responsible for our losses, both material and other, be held responsible and that they pay damages!
- We demand that experts appointed by civil organizations be allowed to participate in formulating the finance solution!
- We demand an immediate moratorium on foreclosures!
The organizer also added that in every single detailed calculation the banks were required to calculate and display the amount of the “unethically calculated interest.” “After a statement such as this why haven’t the authorities gone after the banks? This is fraud!” he exclaimed.
Since they were not able to deliver the petition, the protesters announced their intention to close the József Attila street between 4:30 pm and 5:30 pm, and said they would demonstrate by sitting on the road. Some shouted that they had nothing to lose anyway because they cannot pay. The police were helpful and closed the road within minutes of the demonstrators declaring their intentions.
The demonstrators sat down—some on plastic chairs, some on the asphalt, and started chanting “let the banks lose”, “we won’t allow it” or “Orban scram.” The demonstrators made it clear that the powers-that-be could calculate with more serious “sanctions” in the future.
The affected parties submitted a petition to the European Parliament at the end of March, because they believe that the FX debt relief act violated European Union law guaranteeing the rights of consumers.
Lázár: Every FX debtor is better off
Every FX debtor ended up in a better condition after settling up with the banks than before, said János Lázár, Minister in charge of the Office of the Prime Minister. According to him, some 1.3 million loan holders were HUF 1 trillion better off.
He said there may be customers who feel they were entitled to receive more but that the laws provide the method for resolving such disputes. Lázár believes the government has done everything in its power given that it was the Curia that determined how far it could go.
Undersecretary for government communications András Giró-Szász advised those dissatisfied to file a complaint with the central bank.
Bank Loan Victims Association expert Mrs. Eva Galcsik told ATV: “We are talking about people’s lives here, which are not being taken seriously.
“The biggest problem is that they have expectations of the customers that are not realistic. They expect them to be able to understand the calculation, which of course they cannot, since it is not their field of expertise.”
Galcsik says that those who do not register their complaint within thirty days will lose the right to do so, and from that time on their debts will be “carved in stone.”
The only way to register a complaint is if they find a concrete mistake, in other words they must explain to the bank “such and such a calculation is not right.” This is only possible to do with a detailed calculation which, in the case of a 7-year loan issued by the Erste Bank, consisted of a 184-page spreadsheet featuring 387 columns and 84 rows. Furthermore, the document is full of expressions that ordinary people do not understand. And if the bank entered the wrong formula by mistake, then nobody can understand anything, says the expert.
“Understandably, people don’t know whether to cry or laugh when they read the statement,” Galcsik says. “But that is not the biggest problem. 800,000 people have 30 days to make heads or tails of what they have received but do not find anybody who can explain to them what the numbers mean.”
Galcsik has written a letter to the reconciliation body complaining that FX loan customers need more time but the body responded that there was no possibility of this.
She believes there is little point in converting loans to forints if the debtors cannot pay.
Galcsik points out that the interest rate of the new forint loans can change every three months as it is tied to the central bank rate, which is presently at a historic low. As central bank rates rise, so will interest rates. “So the clients have been freed from the exchange rate risk but received in its place the interest rate risk”.
She says there will be “masses of lawsuits” because most of the debtors have reached the point where they have had enough of promises and want solutions.