August 2023 – Judicial annulment of a Payment Order issued for an amount of 812.000 euros

The decision with the reference number 2770/2023 of the Multi-Member Court of First Instance of Athens has been published, which accepted the filed objection and annulled the Payment Order issued for an amount of approximately 812,000 euros.

The decision held that the stated Cause of Payment in the Payment Order, i.e., the underlying reason for the claim, was incorrect. This error consisted of the Bank’s attempt to issue the Payment Order based on an open account, while in reality, the financial product was a housing loan.

For decades, it has been a consistent practice of specific Banks to provide housing loans as follows: first, a contract was signed that opened a credit line in the form of an open account between the Bank and the Borrower (and possibly guarantors). Subsequently, with additional agreements, the loan was granted, but within the contractual framework of the open account. It should be noted that a characteristic feature of the open account is the possibility for both parties to carry out credit transactions, and the account’s periodic closing reveals the balance, i.e., the debt. On the contrary, with an (interest bearing) loan, the principal is disbursed upfront, accompanied by a clear repayment plan (amortization schedule), and therefore, a specific maturity date is established. The Banks chose this distinctive (and illegal) financing vehicle to gain benefits that consisted of higher interest charges possible on open accounts. Nowadays, the same Banks or their successors seek the compulsory collection of the excessive and compounded interest on these loans by issuing Payment Orders. However, these Payment Orders erroneously indicate the initial “framework” contract of the open account as the underlying reason for their issuance.

The issued decision, accepted that: “Such an open account cannot function when the legal relationship connecting the parties is not a banking credit opening but a common loan; that is, when the lending bank pays the loan amount to the borrower either in full or in installments, and the borrowing party takes on the obligation to repay it either in full or in installments, as in the case of an amortizing loan where the borrower undertakes the obligation to make regular agreed interest and principal payments… When, therefore, the main contracts and disbursements between the parties cannot be served through an open account, then its maintenance is not permissible…”. After examining the terms of the disputed contracts, concluded that: “… From all of the above, it is proven that the initial credit opening contract with an open account was modified and transformed into two separate amortizing loan contracts, which, however… could not be governed by the provisions of the initial credit opening contract, since… the entire loan was disbursed, the installment payment within a specific timeframe was agreed upon, the installments were calculated in an amortizing manner, and the right of the bank to terminate the contract was stipulated in case the debtor becomes overdue in paying the loan for at least 60 days… the autonomy of each installment was agreed upon… and thus, the operation of an open account between the contracting parties was no longer lawful… Consequently, the ground for objection should be accepted as substantiated since neither in the application nor in the contested Payment Order is there a specific and distinct cause for payment, and the acceptance of this argument leads to the annulment of the contested Payment Order…“

Thus, the definitive protection of the debtor from the aggressive actions of the Bank has been achieved.