CJEU rules on settlement methods for Swiss franc loan disputes

The Court of Justice of the European Union (CJEU) has issued a ruling regarding the settlement of invalid Swiss franc-indexed mortgage contracts. The court determined that EU law does not mandate a specific model for settling mutual claims between banks and consumers after a contract is declared void.

Specifically, the ruling allows national courts, including those in Poland, to apply the ‘balance theory’ if permitted by domestic law. Under this method, a court compares the amount the bank disbursed to the borrower against the total amount the borrower repaid, awarding only the difference. For example, if a bank provided 300,000 PLN and the client repaid 350,000 PLN, the consumer would be awarded the 50,000 PLN surplus.

The CJEU emphasized that this approach must not weaken consumer protection. Courts must inform consumers of the consequences of contract annulment and offsetting claims, and they must ensure consumers only receive interest on the surplus amount exceeding the repaid capital. The Polish Bank Association noted that the decision increases predictability for both financial institutions and clients by allowing for a fair and proportional settlement of mutual obligations.