Supreme Court Explains Who Must Prove the Absence of Debt and How

A borrower’s statement that a loan has been fully repaid is not sufficient to refute a bank’s claim for debt recovery. If the debtor insists that the obligation has been fulfilled or that the creditor’s calculations are incorrect, the debtor must provide evidence of payments and, where necessary, a properly substantiated alternative calculation.

The Supreme Court applied this approach in case No. 568/525/15-c, upholding the lower courts’ decisions on the joint and several recovery of the debt from the borrower and the guarantor.

From a $41,700 Loan to a Court Dispute

In 2008, the bank granted the borrower a loan of $41,732.05 at an interest rate of 1.25% per month on the outstanding balance. The loan was due to be repaid by July 2018, and performance of the obligations was secured by a guarantee.

The borrower made payments until March 2014, after which the debt became overdue. In 2015, the bank filed a lawsuit seeking recovery of $37,288.31, which included the principal, interest, commission fees, penalties and fines. The court of first instance partially upheld the claim and ordered the borrower and guarantor, jointly and severally, to pay $31,746.24, comprising $27,747.14 of outstanding principal and $3,999.10 of interest. The claims for commission fees, penalties, fines and part of the interest were dismissed. The appellate court upheld this decision.

If the Debtor Claims Everything Has Been Repaid, It Must Be Proven

In his cassation appeal, the borrower argued that he had fully repaid both the amount actually borrowed and the accrued interest, while the bank’s calculations did not reflect the actual outstanding balance. The Supreme Court rejected this argument.

The courts examined the loan agreement, guarantee agreement, bank statements, payment information, the bank’s debt calculation and its written demand. At the same time, the borrower failed to provide receipts, payment orders or bank statements confirming full repayment of the debt. Nor did he submit a comprehensive alternative calculation specifying the amounts, dates and purposes of individual payments and the remaining balance after they had been credited.

The situation with the court-ordered financial and economic expert examination was also significant. The examination had been ordered at the borrower’s own request but was never carried out because he failed to pay its cost.

The Supreme Court referred to the principles of party autonomy and adversarial proceedings: each party bears the risk of the consequences arising from its failure to take the necessary procedural steps. A cassation court cannot collect evidence on behalf of a party or reassess evidence already examined by the lower courts.

Issues Already Decided by a Court Cannot Be Challenged Again

A significant part of the borrower’s arguments concerned the alleged invalidity of the loan and mortgage agreements. However, these issues had already been considered in separate proceedings in which his claims were dismissed, and the respective judgments had become final.

The Supreme Court emphasized the presumption of validity of a transaction and the principle of legal certainty. Where the validity of an agreement has already been finally determined by a court, the same arguments cannot be raised again as a means of challenging a subsequent claim for debt recovery.

Consumer Protection Does Not Automatically Eliminate Loan Obligations

The borrower also referred to the alleged failure to provide complete information about the loan, unfair charges, small print in the agreement and the absence of a consumer credit passport.

The Supreme Court confirmed that consumer protection legislation applies to credit relationships. However, a bank’s failure to comply with certain information requirements does not in itself automatically invalidate the entire agreement or release the borrower from the obligation to repay the funds actually received.

Moreover, in this particular case, the borrower was not ordered to pay commission fees, penalties or fines. The amount awarded consisted solely of the outstanding principal and interest. The argument concerning the absence of a consumer credit passport was also unsuccessful. The relevant statutory requirement was introduced in 2016, whereas the agreement had been concluded in 2008. Requirements introduced by later legislation cannot automatically apply to an agreement entered into earlier.

A Foreign-Currency Loan Must Also Be Repaid

The Supreme Court also rejected the borrower’s objections concerning the fact that the loan had been denominated in US dollars.

The loan was granted in 2008, while the statutory prohibition on consumer lending in foreign currency was introduced later, in 2011. The Court also proceeded from the principle that a monetary obligation may be denominated in a foreign currency and, subject to the applicable legal conditions, the debt may be recovered in the currency in which the loan was actually provided.

For this reason, the outstanding principal and interest were awarded in US dollars. At the same time, the courts refused to recover the penalty that the bank had also calculated in foreign currency.

What Should Be Considered in Credit Disputes

The Supreme Court’s ruling demonstrates an important distinction for both debtors and creditors between merely disputing a claim and rebutting it with evidence.

If a borrower believes that a loan has been repaid or that the bank has incorrectly calculated the amount outstanding, the legal position should not be based solely on objections to the creditor’s calculations. Primary payment documents, a consistent alternative calculation and, where the correct outstanding balance cannot be established without specialist knowledge, a properly conducted financial and economic expert examination may be required.

At the same time, arguments concerning the invalidity of an agreement that have already been considered in separate proceedings resulting in a final judgment cannot be used to effectively reopen that dispute in subsequent debt recovery proceedings.

In case No. 568/525/15-c, the Supreme Court dismissed the cassation appeal and upheld the decision ordering the borrower and guarantor to pay $31,746.24 jointly and severally. The Supreme Court’s ruling is final.