Overview

In a retail market dominated by foreign currency loans, Hungarian customers were hit especially hard by the financial crisis. With banks raising interest rates and related expenses to counter the increased costs of funding, the retail financing sector was facing ever-increasing scrutiny by consumer protection organizations and the media. In particular, the banks’ contractual right to unilaterally amend retail lending conditions became subject to widespread criticism.

The Hungarian government, understandably eager to introduce popular measures that had no direct negative effect on the budget, adopted an amendment to the Act on Financial Institutions aimed at limiting unilateral contract amendments, in particular the introduction of additional costs and expenses that clients have to bear. The Hungarian Financial Supervisory Authority (HFSA) was also vested with extensive competences as the consumer protection authority of the financial sector. However, the rushed legislation, as stop-gap measures are wont to do, brought about more questions than answers.

Furthermore, some banks did not hesitate to “invent” last-gasp extra expenses before the amendment entered into force, opening the floodgates for even more (well-deserved) public outrage. To ease the tensions, the major players of the retail lending market announced a self-imposed moratorium on unilateral contract amendments until the end of September 2009.