Test case for new Iceland foreign currency car loan ruling

The Lysing finance company has taken a case to the Reykjavik District Court claiming that the interest on foreign currency indexed car loans – which were recently ruled illegal – should be changed to the same as domestic inflation indexed car loans.

The Supreme Court ruling said that foreign car loans are illegal, but the ruling did not say what should take their place. Thousands of loan holders have been struggling under increasing debt burdens as the Icelandic krona collapsed in value following the economic crisis.

Lysing will be hoping to make the most of a bad situation by converting the loans into inflation indexed krona loans, while some loan holders are fighting for interest to be slashed almost entirely and the Central Bank of Iceland is recommending they be changed to reflect its own national interest rates over time.

A court decision is expected in around one month.

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