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2021 | OriginalPaper | Chapter

Complex Mortgage Loans as a Case Study for Consumer Law and Economics

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Authors: Mariusz J. Golecki, Piotr Tereszkiewicz

Publisher: Springer International Publishing

Published in: Consumer Law and Economics

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Abstract

This contribution analyses the challenge to courts posed by foreign currency mortgage loans, risky type of mortgages that were broadly marketed in the Central and Eastern Europe in the last 15 years. There is considerable evidence that foreign currency mortgage loans constitute a “dark chapter” in the history of European mortgage financing. We attempt to show that behavioural analysis can be used as a helpful tool in explaining at least some of the reasons why consumer borrowers opted to choose this type of risky mortgage products.

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Rzeczpospolita from 26 January 2015, http://www.ekonomia.rp.pl/artykul/710047,1174464-Kim-jestes-frankowcu-.html?referer=redpol; Rzeczpospolita from 5 February 2015, http://www.ekonomia.rp.pl/artykul/710047,1177051-Gdzie-mieszkaja-frankowicze.html?referer=redpol; The Economist from 15 November 2014, Forint exchange, http://www.economist.com/news/finance-and-economics/21632651-hungarys-government-gives-struggling-borrowers-break-forint-exchange.

See the official position of the Austrian Financial Market Supervision Authority (Österreichische Finanzmarktaufsicht, FMA) on foreign currency loans: Position der Finanzmarktaufischt zu Fremdwährungskrediten und Informationen zur derzeitigen Lage, https://www.fma.gv.at/de/sonderthemen/fremdwaehrungskredite.html.

Balogh and others ( 2011), p. 1.

The Economist from 15 November 2014, Forint exchange, http://www.economist.com/news/finance-and-economics/21632651-hungarys-government-gives-struggling-borrowers-break-forint-exchange.

Rzeczpospolita from 2 March 2015, http://www.ekonomia.rp.pl/artykul/1183012.html.

The development of exchange rate of franc versus PLN is accessible at the website of the Polish central bank (Narodowy Bank Polski), http://www.nbp.pl/homen.aspx?f=/kursy/kursyen.htm.

C-26/13, Árpád Kásler, ECLI:EU:C:2014:282; C-110/14, Horațiu Ovidiu Costea v. SC Volksbank România, ECLI:EU:C:2015:538; C-186/16, Ruxandra Paula Andriciuc v. Banca Românească SA, ECLI:EU:C:2017:703; C-51/17, OTP Bank Nyrt., OTP Faktoring Követeléskezelő Zrt. v. Teréz Ilyés, Emil Kiss, ECLI: EU:C:2018:750; C-118/17, Zsuzsanna Dunai v. ERSTE Bank Hungary Zrt., ECLI:EU:C:2019:207; C-38/17, GT v HS, ECLI:EU:C:2019:461.

Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ EC No L 95/29.

OTP Bank Nyrt, para. 17.

OTP Bank Nyrt, para. 18.

Kásler, para. 54; Matei, para. 55; Andriciuc, para. 34.

Kásler, para. 54 and seq.

Matei, para. 77 and seq.

OTP Bank Nyrt, para. 88.

Kásler, para. 85.

C-260/18, Kamil Dziubak, Justyna Dziubak v. Raiffeisen Bank International AG, ECLI:EU:C:2019:819.

Dziubak, para. 28.

Dziubak, para. 60.

Dziubak, para. 61.

Dziubak, para. 62.

Dziubak, para. 45.

Dziubak, para. 55.

GT v HS, para. 36.

Cf. the guidance provided by the CJUE in the judgments: GT vs. HS, para. 36; OTP Bank Nyrt, para. 77; Andrucic, para. 56.

GT v HS, para. 40.

Cf. Tereszkiewicz ( 2016).

Cf. Leczykiewicz and Weatherhill ( 2016), in particular Albors-Llorens and Jones ( 2016).

Micklitz ( 2018), pp. 231 seqq.

Kásler, para. 74.

Andriciuc, para. 51.

OTP Bank Nyrt, para. 78.

GT v HS, para. 34.

OTP Bank Nyrt, para. 78.

Andriciuc, para. 44; OTP Bank Nyrt, para. 73.

For an analysis of transparency see Golecki and Tereszkiewicz ( 2019).

Micklitz and Reich ( 2014) note a similar pattern in consumer law cases referred to the CJUE between 2008 and 2012, which came mostly from new Member States and Spain. However, the cases discussed by Micklitz and Reich ( 2014) did not concern foreign currency mortgage loans.

Cf. the study by H-J. Dübel and S. Walley Regulation of Foreign Currency Mortgage Loans: The Case of Transition Countries in Central and Eastern Europe, December 2010, available at http://documents.worldbank.org/curated/pt/383871468336712836/pdf/693820RSC0P1130tgage0loans0Jan02011.pdf.

Aalbers ( 2012), p. 124.

Tereszkiewicz ( 2015, 2016).

Another matter is that meanwhile such mortgage loans were not offered any more due to well-deserved bad publicity which they generated.

We refer to our contribution Golecki and Tereszkiewicz ( 2019).

Kahneman ( 2011), p. 128 .

Kahneman ( 2011).

Posner ( 1992), p. 19.

Coase ( 1960).

Komesar ( 1994).

Posner ( 2007).

Komesar ( 1994, 2001) and Vermeule ( 2006). For other studies pertaining to the cognitive limitations of courts cf. Guthrie et al. ( 2000), Guthrie et al. ( 2007), Hadfield ( 2008), Hadfield ( 2011), Jolls et al. ( 1998), Kunda ( 1990), Nosofsky ( 1992), Petersen ( 2013), Ponzetto & Fernandez ( 2008), Rachlinski ( 1998), Sloman ( 2002), Sunstein ( 2000), Sunstein ( 2001), Wróblewski ( 1988).

Sen ( 2006).

Aalbers MB (2012) European mortgage markets before and after the financial crisis. In: Aalbers MB (ed) Subprime cities. The political economy of mortgage markets. Wiley-Blackwell

Albors-Llorens A, Jones A (2016) The images of the ‘consumer’ in EU competition law. In: Leczykiewicz D, Weatherill S (eds) The images of the consumer in EU law: legislation, free movement and competition law. Hart, Oxford, pp 43–92

Balogh C, Gereben Á, Karvalits F, Pulai G (2011) Foreign currency tenders in Hungary: a tailor - made instrument for a unique challenge. Bank for International Settlements Papers No 73. Available at: http://www.bis.org/publ/bppdf/bispap73k.pdf

Coase RH (1960) The problem of social cost. J Law Econ 3:1–44

Dübel H-J, Walley S (2010) Regulation of Foreign Currency Mortgage Loans: The Case of Transition Countries in Central and Eastern Europe, December 2010, available at http://documents.worldbank.org/curated/pt/383871468336712836/pdf/693820RSC0P1130tgage0loans0Jan02011.pdf

Golecki MJ, Tereszkiewicz P (2019) Taking the prohibition of unfair commercial practices seriously. In: Mathis K, Tor A (eds) New developments in competition law and economics. Springer, Cham, pp 91–106 CrossRef

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Hadfield GK (2008) The levers of legal design: institutional determinants of the quality of law. J Comp Econ 36(1):43–73 CrossRef

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Kahneman D (2011) Thinking, fast and slow. Macmillan, London

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Title

Complex Mortgage Loans as a Case Study for Consumer Law and Economics

Book

Consumer Law and Economics

Print ISBN: 978-3-030-49027-0

Electronic ISBN: 978-3-030-49028-7

https://doi.org/10.1007/978-3-030-49028-7

DOI

https://doi.org/10.1007/978-3-030-49028-7_2

Authors:

Mariusz J. Golecki
Piotr Tereszkiewicz

Publisher

Springer International Publishing

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