CJEU finds that the risks of foreign currency loans must be explained to make foreign currency repayment obligation a core term

In a decision handed down on the 20th September 2017 in Ruxandra Paula Andriciuc v Banca Romanesca SA the CJEU found that a term of a foreign currency loan agreement that required repayment of the loan in the same foreign currency would be part of the main subject matter of the contract, and therefore outside the test for unfairness under the Unfair Contract Terms Directive so long as it was expressed in plain intelligible language.  The court drew a distinction between foreign currency loans where the loan was made and was to be repaid in the same foreign currency (which was the case in the proceedings before it) and foreign currency indexed loans that required repayment in a different currency to that in which the loan was provided.  Whilst the foreign currently repayment obligation in the former would be part of the main subject matter of the contract, in the latter it would not.  However, the CJEU also found that in order to be in plain intelligible language, and therefore outside the scope of assessment for fairness, the consumer must be in a position to take a prudent well informed decision.  This would require the term that required repayment in the same foreign currency as that in which the loan was made to be understood both at a formal and grammatical level, but also in terms of its actual effects.  The average consumer, being reasonably well informed and reasonably observant and circumspect, must be aware of the possibility of a rise and fall in the value of the currency in which the loan was taken out, and be able to assess the potentially significant economic consequences of such a term with regard to his financial obligations.  A link to the full judgment is here: Ruxandra Paula Andriciuc v Banca Romanesca SA