In Hungary there is a so-called “debtors’ ghetto” on the outskirts of the city of Ocsa. It is a small government-built development, housing just a few of the tens of thousands of indebted households; people who took out foreign currency loans before the economic crisis in 2008.

Ildiko and János Ofella and their family moved here when they were threatened with eviction because they could no longer afford the repayments on a mortgage they took out in Swiss francs.

János Ofella explained: “My wife had a job, I was working and still had my pension, so we could pay, but then the forint fell. The exchange rates went wild, and they asked for more and more and more. And then one month we fell behind with the monthly payments. So eventually we applied to come here so as not to get into a situation when the whole family, including the three kids, would be on the street. We needed a stable solution, a way to escape.”

There are around 3.8 million households in Hungary, and approximately a third of them have mortgages which were taken out in foreign currencies, mostly Swiss francs, between 2005 and 2008.

At the time interest rates were three times lower than for loans in Hungarian forints. It was a bargain, until the financial crisis saw the forint fall in value.

In 2011 the Orban government intervened to enable the most solvent households to repay their loans at preferential rates. But tens of thousands of households are still struggling.

In Budapest, Judit Lénárd heads the Association for the Defence of Bank Loan Victims, which helps people renegotiate their loans, and manage their daily budgets better.

She said the situation remains critical. “We see in the long run that an increasing number of households are living off the same income or less than they were at the start of the crisis, but their repayments increase all the time. We think they are the most endangered layer of society, the former middle class, although now almost everybody now belongs to the lower class.”

Her association helped Olga Józsefné Maluzsák who is retired and who lives in an apartment bought with a mortgage in 2007 by her daughter, who emigrated to the US after losing her job in Hungary. But her American salary is not enough to cover the bills; she has not paid for four years.

Olga told us things have become desperate: “When there was a water leak, we could not repair it, and we had to sell the furniture because we had no money.”

Olga paid the mortgage herself for a while. But now she has no money left and says her pension only allows her to meet the daily needs of herself, her granddaughter, and her great-granddaughter.

She says the mortgage has destroyed the family: “The most horrible thing is that after a year, my husband died of a heart attack, and now I’m alone. In Hungary it is impossible to pay all your bills and daily expenses, alongside a loan like this, all on your own. Without help from the association we would not be here. We would already be on the street.”

A recent judgment by the Hungarian Supreme Court, supported by the European Court of Justice, invalidated some terms within foreign currency credit contracts. Some clauses allowed banks to charge different rates for loan disbursements and repayments, to the detriment of borrowers, or to modify loan terms at will. This however, is no longer legal.

András Osztovits, a judge at the Hungarian Supreme Court, explained: “The Supreme Court declared that using different exchange rates in this kind of contract is unfair. Regarding the unilateral contract changes, the court established a legality test. We think that based on the cases we’ve already seen and examined, most of the contracts the banks offered will not meet the necessary requirements.”

A new law should force banks to compensate customers whose contracts are deemed abusive. That would account for an estimated minimum of more than 10 percent of the capital of Hungarian banks. But a new package expected in September could multiply the figures by three or four. It is an additional cost to those imposed by the state in 2011, and to the heavy taxation of banks.

Neither the government nor the banks we contacted wanted to speak to euronews. Nor did the Hungarian Banking Association.

But its former president, Péter Felcsúti, who is also the former head of the Hungarian subsidiary of the Austrian bank Raiffeisen, did speak to us about his fears that the bill will be too big for foreign banks, which control 80 percent of the sector in Hungary:

“Probably most of them, or all of them, will have to refund this loss to their local subsidiaries. It’s another question whether once they have done this, what their policy towards business in Hungary is going to be. Obviously in the past couple of years the foreign banks have been extremely passive in Hungary. I mean they really are zombies in as much as they have kept reducing their lending activity in Hungary, which is clearly very bad for an economy.”

In Siofok, abo