New spec franking law

For years, franking credits have been one of the most controversial topics in the financial market, being a source of endless disputes between borrowers and banks. Faced with a growing number of lawsuits, the courts are bogged down with proceedings, leading to protracted cases and the frustration of thousands of franking borrowers. In response to this situation, the legislature passed a new law on franking credits, with the important goal of speeding up the conduct of trials.

Will the new legislation really improve the situation of borrowers and allow courts to resolve franking cases more efficiently? In this article we take a closer look at the most important changes, assessing their practical impact on borrowers and on the functioning of the judiciary.

1.Suspension of the obligation to repay the loan

Once a lawsuit filed by a consumer is served, the consumer’s obligation to perform under the loan agreement will be suspended by law until the lawsuit is legally concluded.

This change is of key importance to consumers, as it will give them real financial protection early on in the legal proceedings. It will allow them to avoid further repayments that might not be justified if the loan agreement is declared invalid.

2.Trial of the case in closed session by the court

The court will be able to hear the case in closed session. This will enable courts to hear franking cases more quickly and efficiently, which will reduce the lengthiness of cases.

3.Possibility to raise a charge of set-off until the end of the proceedings in the second instance

A charge of set-off will be able to be raised until the end of the hearing before the court of second instance. If the case is to be heard in closed session, the allegation can be raised until the second instance court issues its judgment. This change is beneficial to both parties, as it will allow mutual claims to be settled until the final conclusion of the proceedings.

4.Remote examination of a witness despite a party’s objection 

The court will be able to examine a witness outside of the trial, at a remote session, even if a party files an objection. This solution will streamline the process of collecting evidence and shorten the time of the proceedings by eliminating the need for the witness to be physically present in court.

5.Acceptance of the parties’ written testimony

Upon court order, parties can be heard by accepting their testimony in writing. The ability to testify in writing will increase the convenience of the trial and speed up its progress. This will be particularly beneficial in situations where personal appearance in court is difficult.

6.Defendant’s counterclaim when the loan agreement is void.

If the plaintiff pursues claims based on the invalidity of the loan agreement, the defendant will be able to assert a counterclaim in case the agreement turns out to be invalid. This provision will safeguard the banks’ interests by allowing them to file counterclaims. In turn, the consumer will gain the advantage of having all claims comprehensively resolved in a single court proceeding.

7.Immediate enforceability of the judgment in favor of the consumer

A judgment of the court of first instance awarding a monetary benefit in favor of the consumer will become enforceable as soon as it is announced, and if it is issued in closed session – as soon as it is served on the defendant. The immediate enforceability of the judgment will strengthen the protection of consumers, allowing them to recover the awarded amounts more quickly without having to wait for the judgment to become final. This will increase the real effectiveness of court judgments.

8.Consideration of the case by the court of second instance in closed session

The court of second instance will be able to hear the case in a closed session. Allowing the second instance court to hear cases in closed session will affect the speed of appellate proceedings. It will shorten the time to wait for the final conclusion of the case and relieve the burden on appellate courts.

The franking law is an important step towards removing the lengthiness of court trials.

However, according to many lawyers, the proposed solutions of the specustaw may seem controversial, such as the institution of automatic security of proceedings despite the lack of substantive control of the court as to whether the lawsuit will concern the so-called “franking agreement”, for example.

Time will tell whether the spec law will come into force to the proposed extent and will be applied by the courts.