CHF loans vs. WIBOR: Current challenges and solutions for 2024

The current situation for CHF borrowers: Challenges and prospects

For years, borrowers with mortgages denominated in Swiss Francs have faced significant financial strain. The core of the CHF loan problems stems from the sharp appreciation of the Swiss Franc against the Polish Złoty, which caused outstanding loan balances to swell, often exceeding the property's initial value. Compounding this issue is the legal argument, now widely supported by courts, that these loan agreements contained abusive or prohibited clauses related to currency conversion mechanisms, giving borrowers a strong legal position.

The landscape has been decisively shaped by rulings from the Court of Justice of the European Union (CJEU) and a consistent line of jurisprudence in Polish courts. These rulings have empowered consumers, establishing that unfair terms are not binding. As a result, borrowers now have viable paths to challenge their contracts, with prospects ranging from complete loan annulment to converting the loan into a more favorable Złoty-based agreement. The current situation is one of legal empowerment, though it requires proactive steps from the borrower.

Settlements with banks: Is it a good solution?

In response to the growing number of lost court cases, many banks have begun proactively offering CHF loan settlements to borrowers. These proposals typically involve converting the remaining CHF debt into Polish Złoty at a negotiated exchange rate and switching the interest rate basis from SARON (which replaced LIBOR) to WIBOR plus a bank margin. The primary advantage of a settlement is speed and certainty—it resolves the issue in a matter of weeks without the stress and cost of a lengthy court battle.

However, a settlement is a compromise. While it provides immediate relief, the financial benefits are almost always significantly lower than what could be achieved through a successful lawsuit. Banks design these offers to be attractive enough to deter litigation while still being financially advantageous for them. Borrowers should carefully analyze any settlement offer with a legal professional to compare the proposed terms against the potential outcome of a court case, which could lead to the complete nullification of the debt.

Suing the bank: Chances of winning and associated costs

Filing a CHF loan lawsuit has become the most effective method for borrowers to resolve their toxic debt. The success rate for consumers in Polish courts is exceptionally high, with estimates often exceeding 95%. This is due to the established legal precedent that the indexation clauses used by banks were abusive, rendering parts or all of the loan agreement invalid. A lawsuit offers the chance for a far more favorable outcome than a settlement, but it requires patience and an initial investment.

Potential outcomes and associated costs

The two primary outcomes of a successful lawsuit are loan annulment or 'un-francing' the loan. Annulment treats the contract as if it never existed, requiring the parties to return what they received—the borrower returns the principal in PLN, and the bank returns all installments paid. Often, this means the borrower has already repaid the principal and the loan is considered closed. 'Un-francing' converts the loan to PLN while retaining the original, very low interest rate based on LIBOR/SARON, creating a very cheap mortgage. The costs involve legal fees, which can sometimes be based on a success fee, and court filing fees. Despite these costs, the potential financial recovery makes litigation a compelling option for most CHF borrowers.

Restructuring a CHF loan: How to reduce the burden?

The option of a CHF loan restructuring should be distinguished from a legal settlement or lawsuit. Traditional restructuring involves negotiating new terms with the bank without challenging the validity of the original contract. This could include temporarily lowering monthly payments, extending the loan period, or other modifications aimed at easing the immediate financial burden. This path might be considered by borrowers who, for various reasons, wish to avoid both litigation and the specific settlement programs offered by banks.

However, in the context of Polish CHF loans, this approach is generally less effective. It fails to address the fundamental problem of the abusive clauses and the inflated principal resulting from unfair exchange rate mechanisms. While restructuring can provide short-term relief, it does not offer a permanent solution and leaves the borrower with a fundamentally flawed and expensive loan. Therefore, it is a path rarely recommended by legal experts compared to the more definitive solutions available through legal challenges.

WIBOR vs. CHF loans: An analysis of different scenarios

The comparison between a CHF loan WIBOR-based loan has become more nuanced in recent years. For a long time, CHF borrowers suffered from currency risk, while those with Złoty loans enjoyed stability. However, the recent cycle of interest rate hikes has significantly increased the monthly payments for WIBOR-based mortgages, exposing their vulnerability to interest rate risk. This has led some to question which situation is worse.

The key difference lies in the legal foundation. A standard WIBOR-based loan is generally considered legally sound, leaving borrowers with little recourse other than waiting for interest rates to fall. In contrast, a CHF loan, despite its currency risk, contains a critical legal flaw. A successful lawsuit can transform a toxic CHF loan into a PLN loan with an extremely low, fixed-margin interest rate (based on the original SARON/LIBOR structure), making it far cheaper than any standard WIBOR-based mortgage available on the market. Therefore, while both groups of borrowers face challenges, CHF borrowers possess a unique legal leverage to achieve a resolution that is financially superior to the situation of an average Złoty borrower.

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