Legal circles are weighing in on the Supreme Court’s plenary session ruling regarding Katseli Act loans, noting that three numerical parameters are required to calculate (contractual) interest:
- The base (principal) on which the interest will be calculated
- The interest rate
- The interest period.
For these reasons, the Magistrates’ Court of Ioannina sought clarification, and the case reached the Plenary Session of the Supreme Court. The majority of the Plenary Session held that:
- The basis for calculating interest will be the monthly installment of 500, 1,000, etc., and not the total principal amount of the settlement (e.g., 100,000 euros).
- The interest rate will be that specified in the decision—if it is fixed, e.g., 2% for the entire duration of the arrangement, then 2%.
- If it is variable, then the variable rate for the month in which the installment is paid.
As for the time period, it obviously covers the time from when the arrangement began until the installment is due. According to this approach, the first installment will accrue interest for one month, while the 100th installment will always be calculated as an installment (e.g., 500 euros), using this principal amount (500 euros) for 100 months.
As for the borrower’s benefit, the same sources argue that it is one thing to calculate interest (principal and interest) on the total principal (e.g., €100,000) and quite another to calculate it on the amount of the monthly installment (e.g., €1,000).
On this point, they refer to the decision itself, which clearly states on page 44 “Moreover, when the court intervenes judicially and determines the number of installments and the time of their payment, it divides the principal into several separate principal amounts on which interest must be calculated based on the principle of the accessory claim (accessory claim), that is, interest cannot be calculated on the total debt once it has been divided into periodically payable installments.”
Furthermore, on page 45 of the Plenary Session’s decision, it clearly states that if the interest rate is fixed, the installment from the start of the arrangement—i.e., the 1st, 100th, etc.—will accrue interest at the same rate. “And obviously, we cannot say that the Plenary Session creates two different categories of borrowers—namely, that those with a fixed rate will pay interest from the first day of the arrangement, while those with a variable rate will pay interest only for one month,” the same sources continue.
In both cases, it is a given that interest will be calculated on the fixed monthly installment for the entire year from the start of the arrangement until its expiration, in accordance with the generally accepted method of calculating interest (as provided for in the provisions of the Civil Code).