French court rules on Swiss franc mortgage dispute

A French court ruled that a mortgage loan denominated in Swiss francs (CHF) was unfair to the borrower, who lived in France but earned income in CHF. The bank had argued that the loan posed no exchange risk because it was issued and repaid in the same currency, but the court disagreed, noting that long-term contracts like mortgages can be affected by changes in a borrower's financial situation, residence, or currency values over time.

Court clarifies legal actions and prescription rules

The court distinguished between two legal actions: one to declare a contract clause abusive and another to seek restitution of funds. It emphasized that the action to declare a clause abusive cannot be subject to time limits that would prevent consumers from seeking protection under EU law. However, the restitution action is subject to a five-year period under Article 2224 of the Civil Code, starting when the borrower becomes aware of the issue.

Timeline of events and legal challenges

The borrower faced a payment issue in August 2017, followed by the conversion of the loan to euros in October 2017 and a financial assessment of damages in February 2018. A formal complaint was sent to the bank in April 2018. The court rejected the bank’s argument that the restitution action had expired, as the legal proceedings were initiated in February 2023, well within the five-year period.

Abusive clauses and transparency requirements

The court applied Article L132-1 of the Consumer Code, which defines abusive clauses as those that create a significant imbalance between the rights and obligations of the parties. It emphasized that clauses defining the main purpose of the contract must be clear and understandable. The three disputed clauses—E, F, and G—were found to be unclear and thus abusive, as they did not properly inform the borrower of the risks involved.

Lack of information on exchange rate risks

The court stressed that financial institutions must provide enough information to allow borrowers to make informed decisions. It found that the bank had not adequately explained the risks of currency fluctuations, such as the impact of a Swiss franc depreciation on the borrower’s ability to repay the loan. This lack of transparency led to an unfair burden on the borrower.

Retroactive annulment and financial consequences

The court ruled that the three clauses were essential to the loan agreement and that the contract could not stand without them. As a result, the contract was annulled retroactively, requiring both parties to return any benefits they received. The borrower must repay the initial loan amount, while the bank must return the collected installments. The net result was a judgment of 326,588.62 euros in favor of BNP Paribas, plus legal interest from December 2, 2025.