Historical Verdict and Citizens’ Victory against the Banks

5 July 2013 by Franc Association (Croatia)


Zagreb, July, 4th, 2013. – Franc Association has achieved a historical victory in the dispute against eight commercial banks (UniCredit - Zagrebačka Banka, Intesa SanPaolo - Privredna Banka Zagreb, Erste & Steiermärkische Bank, Raiffeisenbank Austria, Hypo Alpe-Adria-Bank, OTP Bank, Société Générale - Splitska banka and Sberbenk (ex Volksbank). Judge Radovan Dobronić has reached the first instance verdict completely in favor of “Consumer” Association.

The judge ruled that the banks acted contrary to the provisions of the Consumer Protection Law since they contracted currency clause in Swiss francs while not informing the consumers about the potential risks. The banks have also violated the provisions by contrating variable interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
without determining the calculation parameters. Interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rates varied according to the one-sided bank decisions without the client being informed about the precise calculation method or parameters used. “This is contrary to the provisions of the Consumer Protection Law, a violation of the Law of Obligations, and the banks are required to reduce the principal to the amount of the domestic currency, Croatian kuna, issued at the beginning of the loan. The interest rate should be applied to the principal calculated in kuna. The applied interest rate should be the same as the one determined at the beginning of loan, and it has to be fixed interest rate for the whole repayment period. Burden of litigation costs borne by the bank,”- said the judge Dobronić.

Lawyer Nicole Kwiatkowski, plaintiffs’ counsel is satisfied with the first-instance judgment and pointed out that the judgment was positively though, is still only the first instance verdict. "We have done a lot, but it still does not mean that something will change for those citizens who have been harmed, because there is still appeal”- said Kwiatkowski.

“The judge has successfully applied the laws on the economic matters showing exceptional knowledge and understanding of the problem noting all the harmful effects in the synergy of contractual parameters. Finally, the judge pointed out well that the variable interest rate unilaterally applied to the variable amount of the principal (application indexed). The loan user, as a non-professional, had very little information and all the risk on their backs compared to banks, which are professionals and had all the information available and transferred almost all the risks to the consumers”- said the economist Branka Lukačević-Gregić.

This ruling will not compensate individual loan users, who will have to raise individual claims against the banks. To avoid high pressure on the bank and the judiciary, the judge urged the bank to reconsider the settlement.




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