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BNP Paribas settles Swiss franc mortgage dispute

FILE PHOTO: Illustration shows BNP Paribas Bank logo

By Mathieu Rosemain

PARIS (Reuters) - BNP Paribas has struck a deal with customers after a court found it guilty of misleading practices over Swiss-franc denominated mortgages, in a move that could cost the French bank as much as 600 million euros ($658 million), a source close to the matter said.

The settlement follows eight years of litigation led by French consumer group CLCV and targeting BNP's consumer unit BNP Paribas Personal Finance, which offered the loans amid the 2008-2009 financial crisis.

"We confirm that, at Personal Finance's suggestion, an agreement has been reached with the CLCV association to offer an amicable solution to customers who so wish," BNP Paribas Personal Finance said in an emailed statement, without elaborating on the costs of the settlement for the bank.

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Under the agreement, the mortgage contracts - which in general ranged from 120,000 to 150,000 euros - can be cancelled and customers will no longer have to pay the bank interest on their loans, the source close to the matter said.

That could cost BNP Paribas between 400 and 600 million euros that the bank would otherwise have received in interest in future, the source added, confirming a report by newspaper Le Parisien.

CLCV said in a separate statement that about 4,400 customers could benefit from the deal. The Paris appeals court in November found BNP Paribas' consumer unit responsible for damages suffered by the customers.

The loans in question, designed for tax-free rental investment, were made in Swiss francs but repayable in euros. The terms of the loans enabled borrowers to benefit from lower interest rates but exposed them to foreign exchange risk.

Their repayments soared when the euro fell against the Swiss currency in the wake of the 2008 financial crisis.

($1 = 0.9115 euros)

(Reporting by Mathieu Rosemain; Editing by Tommy Wilkes and Mark Potter)