Polish court sets stage for rulings on contested FX mortgages

WARSAW, May 7 (Reuters) - Poland’s Supreme Court set the stage on Friday for a hearing next week which is due to determine how courts treat thousands of borrowers took out Swiss franc loans more than a decade ago only to face ballooning repayments when the zloty weakened.

Seven judges responded to a question from the financial ombudsman over cases where a loan agreement is deemed invalid, ruling that claims made by Polish banks that extended foreign currency loans and the client claims are separate issues.

Banks and mortgage holders are awaiting a sitting on May 11 at which all the judges of the Supreme Court Civil Chamber will answer six questions which are expected to decide whether banks agree to sign up to a plan for settlements with clients.

“The consumer and the lender are entitled to separate claims for the reimbursement of cash payments executed in the performance of the contract. The lender may request the return of the money from the moment the loan agreement becomes permanently ineffective,” the court said in a statement.

Deciding when the period during which banks can make claims starts and ends is important in determining how big potential losses arising from the mortgages could be.

Polish financial market regulator KNF estimates that a plan for settlements with clients that it proposed in December would cost banks 34.5 billion zlotys ($9.21 billion).

However, it estimates the cost to banks from court cases at 70.5-234 billion zlotys.

The top European Union court said last week that national courts should decide if foreign currency mortgage contracts containing an unfair clause should be annulled. ($1 = 3.7471 zlotys) (Reporting by Anna Wlodarczak-Semczuk and Alan Charlish; Editing by Alexander Smith)