§ 5-12. Foreign currency loans: right to convert the loan to another currency

The Financial Contracts Act (Finansavtaleloven)·LOV-2020-12-18-146

Machine-translated from Norwegian. The Norwegian text is the one that applies. Read the original in Norwegian.Norsk English العربية Polski Українська

In brief

Consumers (forbrukere) can demand that a foreign currency loan (valutalån) be converted to another currency.
The choice is between the currency of your income or assets and the currency of the EEA (EØS) country where you lived when the agreement was entered into.
The bank must give written notice when exchange rate fluctuations have changed the debt or the instalments by more than 20 per cent.
As a general rule, the right can be used once.

The text of the law (unofficial translation)

§ 5-12. Foreign currency loans

(1) A customer (kunde) who is a consumer, or a consumer who repays credit under the rules on liability under a personal guarantee (kausjon), may demand that credit which was a foreign currency loan when the agreement was entered into be converted to

a currency in which the customer had their main income or assets at the time of the most recent credit assessment (kredittvurdering)
a currency used in an EEA state where the customer was resident when the agreement was entered into.

(2) Unless otherwise agreed, the general exchange rate on the day of conversion shall be used for the conversion.

(3) In the case of foreign currency loans, the customer shall be notified in a written document when the outstanding credit amount or future instalments have, as a result of fluctuations in the exchange rate, changed by more than 20 per cent from what the credit amount or instalments would have been if the exchange rate, cf. the first and fourth paragraphs, at the time the agreement was entered into had been applied. The notice shall also state the right to convert the loan under the rules in this section, and the lender (kredittyter) shall provide sufficient guidance to enable the customer to reduce the risk associated with fluctuations in the exchange rate.

(4) It may be agreed that only one of the alternatives under the first paragraph may be used for the foreign currency loan.

(5) The right to convert a foreign currency loan applies only if the right to convert foreign currency loans under the rules in this section has not been used previously, unless otherwise agreed.

Source: Lovdata — Finansavtaleloven (the Financial Contracts Act) § 5-12

What does this mean?

A foreign currency loan is a loan taken out in a foreign currency. When the exchange rate between the currencies fluctuates, so do the debt and the instalments you pay. This section gives consumers a right to have the loan converted to another currency. The right also applies to a consumer who pays off the debt because they have given a personal guarantee (guaranteed someone else's loan).

You can choose between two currencies. The first is the currency in which you had your main income or assets when the bank last assessed your ability to pay. The second is a currency used in the EEA country where you lived when the agreement was entered into. The agreement can limit the choice so that only one of the two alternatives is available. The conversion takes place at the normal exchange rate on the day it is carried out, unless the parties have agreed otherwise. The right can only be used once, unless the agreement says otherwise.

The bank has a specific duty to notify. If exchange rate fluctuations have caused the remaining debt or future instalments to change by more than 20 per cent compared with the rate when the agreement was entered into, the bank must send written notice. The notice must remind you that you can convert. The bank must also give advice that allows you to limit the exchange rate risk.

Conversion is not the same as terminating the loan. Under § 5-13 the customer may give notice of termination (oppsigelse) of a credit agreement (kredittavtale) at any time, and under § 5-9 the customer can ask for a repayment plan. The sections § 3-34 (information about credit agreements) and § 8-2 (transitional rules) refer to this provision.

Example: A consumer has a loan in a foreign currency. The exchange rate has moved so that the instalments have risen a lot, and the bank sends a notice. The consumer can then demand to have the loan converted and choose the currency in which their main income was at the most recent credit assessment. If the right has been used before, and the parties have not agreed otherwise, it cannot be used again.

Related sections

All sections of the Financial Contracts Act →