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EFTA Court Finds Icelandic Loans to Be Illegal

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EFTA Court Finds Icelandic Loans to Be Illegal

Money - Icelandic Króna

Photo: Páll Kjartansson

The EFTA Court ruled on Monday that it is not in compliance with the EU directive to base agreements for indexed consumer loans on zero percent inflation. Icelandic courts are to evaluate what effect the false information has had and what measures can be taken in response.

Reykjavík District Court requested the EFTA Court’s opinion on the issue after Sævar Jón Gunnarsson sued Landsbanki over the issue because a consumer loan of ISK 630,000 (USD 5,115, EUR 4,105 at today’s exchange rate), which he took in the autumn of 2008, assumed no effect by the indexation, ruv.is reports.

“[This is a] great victory for Sævar and the Icelandic consumer,” commented his lawyer Björn Þorri Viktorsson to visir.is.

Icelandic authorities have expressed their concern over the ruling as retroactive repayments may have economic consequences for financial markets and the country’s financial institutions. The ruling may also have an impact on mortgages.

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