A precedent in Jordan .. The judiciary beats borrowers and prevents banks from raising interest rates

Mahmoud Al-Sharaan-Amman

The Jordanian (Abu Tariq) did not know that his trip with a housing loan from a bank would be long with increasing interest on him without his knowledge, but that was before he got a judicial decision that prevents banks from raising interest rates retroactively to borrowers.

Abu Tariq, fifty years old, began his career with banks in 2006, when he considered buying an apartment in one of the areas of the capital, Amman, for $ 45,000 for a period of twenty years, with a monthly payment of approximately $ 373.

Abu Tariq says he was surprised - after 12 years of paying his monthly installments - that he only covered 2,820 dinars ($ 3,900) of the apartment’s price, to return to the bank and ask about the reasons for that, so he knows that the interest rate was rising monthly without his knowledge.

The borrower speaks to Al Jazeera Net about his feeling of injustice when he knows that loan interest rates have increased without his knowledge or notice, adding that the interest on his loan was rising by 8% or 9% per month, although the agreement was based on only 6%.

"I went to the court, accompanied by lawyer Mahmoud Awajan, to file a case against the bank, for violating the original agreement."

Judicial decision
After two years of the age of the case, the Court of Cassation issued a final decision ensuring that the new interest rates, if raised by the Central Bank, will be applied to the contracts of the new banks regulated after their issuance.

The court added, according to the decision, that "the creditor bank will not be able to raise the interest rate from the agreed rate upon concluding the contract in light of the issuance of a new decision by the central bank to raise the interest rate."

She explained, "The reliable interest rate is the one that came with the agreement of the two parties in writing in the contract, without any other printed conditions."

According to the court’s decision, “it is established that it is based on jurisprudence and jurisprudence that the principal in accruing interest is the agreement of the creditor with the debtor. If the parties agree on a specific price, the creditor may not resign by raising it.”

Judicial precedent
For his part, attorney Mahmoud Awajan, who pleaded with Abu Tariq, affirms that the decision of the Court of Cassation is a judicial precedent, because it is the first decision that the bank does not have the right to raise the interest rate on contracts that are applicable voluntarily without the consent of the victim, so that the central’s decisions to raise the interest rate apply to new contracts.

The attorney shall transfer to Al-Jazeera Net the court’s decision, which considered that “the authority of the central bank in issuing orders and decisions to determine the maximum and minimum interest rates does not in any way mean that what it issues is considered as a rule of public order that applies directly to the benefits under which the previous contracts are worth.” To work on it. "

The court held that the Central’s decisions “are not deemed to be based on legal principles related to public order, and the nullity of their contravention of what the banks hold with their customers from banking contracts is not nullified unless the agreed interest rate exceeds the maximum determined by those decisions, given that the maximum determined for the interest Which may be legally agreed upon is related to the rules of public order which require the protection of the weak party in the contract from exploitation.

The central bank pledged in the past to urge banks to reduce interest rates, in line with its decisions aimed at reducing borrowing costs and stimulating the business environment.

The central bank cut interest rates on all monetary policy tools more than once, during the last period, but the banks refuse to reduce interest on loans and credit facilities granted to different sectors and individuals.

Recently, citizens increased their demand for housing loans, with the aim of obtaining a small apartment, rather than housing in monthly rents, which prompted banks to extend profitability loans extensively.

Prevention of penetration
Economist Hossam Ayesh believes that the judicial decision is strategic, especially as it put an end to banks regarding raising the interest rate on loans.

Ayesh says to Al Jazeera Net that the judicial decision prohibits banks from turning to borrowers, as it is assuming that banks adhere to the court’s decision and implement it and not raise interest rates on loans during the period of validity of any of them.

The economist warns that banks may resort to raising interest rates on new loans, in order to be on the safe side if the costs change over them in the future.