BN-04
The limits of understanding complex information and the structure of a loan agreement
A dual-currency agreement introduces or refers to several new concepts that do not appear in single-currency agreements. Failure to understand these concepts excludes the possibility of assessing the consequences of signing it, and even more so of assessing its correctness. The provisions containing the data needed to calculate the price of the loan are not highlighted in one paragraph, as they should be, but hidden in several different places in the agreement, and making a price calculation on their basis requires specialist analysis and professional economic knowledge.
A dual-currency agreement only appears to be an ordinary loan agreement, that is, a single-currency agreement.
What did the borrower of a dual-currency loan have to know in order to understand the content of the agreement they were signing?
I will list only the headings:
A. What function the second currency serves in the loan agreement, because this was not about a cheaper loan.
B. What valorization and a valorization index are (the agreement simulates this operation).
C. Currency trading (the agreement simulates this transaction).
D. Trading in currency options (the provisions of the agreement contain this transaction).
E. The method of determining exchange rates in commercial transactions, as distinct from the method and purpose of determining average exchange rates by the National Bank of Poland (an incorrect mechanism for determining the exchange rate was written into the agreement).
F. Calculating the risk of a change in the foreign-currency exchange rate [CHF] over the next 30 years on the basis of historical data, while finding such data in the first decade of the twenty-first century was not easy.
G. Assessing the correctness of the dual-currency loan repayment simulation prepared by the bank! — and yet it was the bank that was supposed to make it easier for the borrower to estimate the price of the loan by giving them a document in which everything was visible. Basing the calculation only on changes in the loan interest rate and assuming that the currency exchange rate was constant was simply fraud.
H. Assessing the correctness of the dual-currency creditworthiness assessment in comparison with creditworthiness in PLN, which again means that the borrower was supposed to check the bankers’ calculations in order to verify whether they were not deceiving them by claiming that they had no creditworthiness for a PLN loan, but did have it for a dual-currency loan. But should it really be the consumer’s responsibility to monitor the correctness of complex calculations made by economists at the bank?
I counted eight difficulties in it that the dual-currency borrower faced, although they should not have encountered any of them.
It is not enough here merely to have a rough idea of what the individual terms mean; one needs detailed practical knowledge and must use it for time-consuming analyses and calculations. On each of the topics listed, the consumer-borrower’s knowledge would have had to be highly professional, that is, greater than that of the credit advisers employed by the bank, because they also knew little about the above matters. It turns out that a person taking out a loan should have specialist knowledge from several different fields, that is, the knowledge of several bank analysts.
I leave the comprehensive study to the specialists who will edit this page.
Above, I have included only my observations.