From Iceland — Íslandsbanki Deems Foreign Currency Loans Legal

Íslandsbanki Deems Foreign Currency Loans Legal

Published June 7, 2013

Bad news for Íslandsbanki (ISB) customers: the powers that be within the bank have decided that foreign currency loans are legal and, therefore, will not be recalculated. Customers were notified of this decision by post at he start of the month, RÚV reports.
Guðmundur Andri Skúlason, chairman of the Federation of Borrowers, believes that the case needs to be scrutinized more closely to determine the legality of the foreign currency loans.
“There has been a court ruling on one specific issue at ISB on these points but we believe that the judgment is not sufficiently clear precedent for all other loans of different form that the bank offers. Therefore we want to take additional measures to get clear answers about what constitutes legal and what is illegal in this regard,” said Guðmundur.
Guðmundur believes that since the loan rate is guaranteed but foreign currencies are not, then the loans must be deemed illegal.
Foreign currency loans were popular for borrowers ahead of the 2008 economic collapse. However, following the collapse holders of such loans found themselves owing more than double the amount of their original loan amounts in some cases on account of the króna’s devaluation against foreign currencies.
RÚV is further reporting this morning that the recent decision deeming ISB foreign currency loans to be legal puts ISB customers in worse standing than customers of other banks. While ISB customers’ foreign currency loans will not be recalculated, holders of comparable loans from Landsbanki have seen their loans adjusted.

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