The Government submitted a draft law on consumer credit to the Chamber of Deputies as parliamentary bulletin No. 679 on 22 December 2015.
The declared objective of the bill is to bring Czech legislation into compliance with EU legislation, transpose certain European directives into Czech law, reduce the number of non-bank lenders and improve oversight of such entities.
Pursuant to the bill, consumer loan providers shall have to obtain CNB accreditation and revise their existing contractual documents. Requirements to obtain accreditation will include a minimum basic capital of at least CZK 20 million, proof of competence and demonstration of credibility. Consumer loan providers shall have to meet these requirements within two years of the law’s proposed effective date of 21 March 2016. Accreditation will only be granted for a 5-year period with the possibility of a subsequent extension based on payment of an administration fee. Entities that have been granted accreditation will be entered in a registry kept by the CNB. The requirements are also stricter for intermediaries of non-bank loans whose business will be subject to CNB permission or registration.
As concerns contractual documents, the law will begin to apply to new loans immediately after it enters into effect. This means lenders do not have much time to revise their documents to be in compliance with the new obligations when the law enters into effect. There is a rather wide range of necessary modifications to contractual documents, and pre-contractual documents will have to be far more detailed.
For example, the levels of contractual fines will be changed. A ceiling of 0.1% per day of the amount with which the consumer is in arrears, and an aggregate maximum of all contractual fines of 70% of the principal, will be introduced with the proviso that such contractual fines not exceed CZK 200,000 in total.
The bill introduces a ban on bundled sales in consumer loan intermediation, where a provider will be unable to restrict the consumer’s choice of a supplementary financial service provider, if loan agreement execution is made contingent on the execution of a contract on supplementary financial service. There will be three exceptions to the ban on bundled sales: the first two for payment or savings accounts, where the keeping of a savings account and provision of a loan are inextricably tied in building societies, and the third for the purposes of financing a vehicle, where the financing company needs to verify the quality of the insurance covering its financed vehicle.
The bill newly introduces foreclosure deferment whereby a creditor will be authorized to monetize collateral securing a consumer housing loan no sooner than 6 months after the consumer has been informed of the intention to sell the real estate securing the consumer loan.
Finally, the bill introduces a “cooling-off period” providing the consumer with a 14-day period in which to study the binding contractual terms for a housing loan and decide whether or not to enter into the contract. If the consumer notifies the lender or intermediary of acceptance of the draft contract within 14 days, the lender will be obliged to execute the contract without delay under the submitted draft contractual terms and conditions; legal enforcement of contract execution may be sought in accordance with § 1787 of the Civil Code.