On 20 September 2016 was published in the Official Gazette of Romania the Government Emergency Ordinance no. 52/2016 on credit agreements offered to consumers for immovable property and for amending and supplementing the Government Emergency Ordinance no. 50/2010 on credit agreements for consumers („GEO 52/2016”). The relevant provisions of Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property (the „Directive”) were thus implemented into national law, although passed the transposition term of 21 March 2016 established by the Directive.
The new legislation entered into force on 30 September 2016, leaving to creditors less than 10 days to adapt their pre-contractual and contractual documentation, procedures and software to the new legal requirements, some of which trigger the need of more than substantial adjustment.
Besides transposing into national law the provisions of the Directive, including provisions on advertising and marketing, pre-contractual and contractual information, advisory services, loans in foreign currency, assessment of consumer’s creditworthiness, GEO 52/2016 contains additional rules applicable to the credit granted to consumers for immovable property (residential or not), but also to consumer credit in general, irrespective of purpose.
Such additional rules provide, among other, limitation of the rights or additional conditions for the creditors in case of financial difficulties of the borrowers and in relation to the enforcement against defaulting borrowers, including:
- a cap of the rate of default interest to 3% above the current interest;
- default interest can be calculated only to overdue principal and cannot exceed the amount of the overdue principal;
- the lender may accelerate the loan only for overdue payments exceeding 90 consecutive days;
- after acceleration only default interest may be charged, at a rate capped at 2% above the rate of the current interest;
- during the enforcement procedures it is forbidden to charge interest and default interest;
- if the enforcement is not initiated in maximum 6 months as of the date of acceleration of the loan, starting with the day following the expiry of the 6-month term the lender cannot charge default interest.
GEO 52/2016 regulates the credit intermediaries and the debt collection entities, establishing organizational, professional competence, registration and detailed business conduct requirements and, in case of debt collection entities, minimum share capital requirements.
Credit intermediaries and debt collection entities have to register with the National Agency for Consumer Protection (“NACP”) in order to perform the relevant activities.
In addition to knowledge and professional competence requirements duly attested, credit intermediaries have to maintain professional insurance and to be registered as personal data processors in accordance with the Data Protection Law.
As of 1 January 2017 only debt collection entities registered with NACP may perform debt collection activities. In order to be registered by NACP, debt collection entities have to:
- have a minimum share capital of lei 500,000;
- have the registered office, a branch or a representative in Romania for the settlement of potential disputes and for liability for administrative fines or penal sanctions in front of the Romanian authorities;
- prove that the persons responsible for the management and supervision of the activities have a good reputation and possess adequate knowledge and experience considering the nature, size and complexity of the envisaged activities;
- not establish the remuneration and incentives for their personnel solely based on goals related to the recovery of the debts or exclusively linked to the recovered amounts.
Provisions regulating the assignment of receivables from consumer loans are also to be noted by the loan originators and by the debt collection entities, among which we mention:
- the prohibition to transfer receivables from consumer loans to entities other than professional lenders, securitization vehicles or, only applicable to receivables from non-performing loans, to registered debt collection entities;
- the prohibition to assign a credit agreement and its accessories, or the receivables from credit agreements to an entity that does not have the registered office, a branch or a representative in Romania;
- the prohibition to perform debt collection activities in the period of 30 days following the notification of the consumer in relation to the transfer of the receivable, or until responding to the consumer’s objection if the consumer objected on the existence of the debt or the debt’s amount.
One can say that a new era has started for consumer credit regulations in Romania in 2016, with an abundance of pieces of law setting a derogatory regime in favour of the consumer, touching not only the future credit agreements but also, for a part of the regulations, the stock of existing ones.
After the Law for giving into payment entered into force in May 2016 and the regulation of the National Bank of Romania extending the application of prudential and responsible lending requirements to non-banking financial institutions registered with the General Register, the date for the entry into force of the Law on the insolvency of natural persons was moved from 31 December 2016 to 31 October 2016 and the Romanian Parliament approved on 18 October 2016 the Law for the conversion of the loans in Swiss francs into Romanian lei at the exchange rate valid on the date the loan was granted.
It remains to be seen whether the various measures enacted by recent legislation will actually help the consumers to have access to more fair terms and affordable credit to satisfy their needs, or, on the contrary, will “help” to the raise of the cost of the credit and to the demise of the market for residential real estate development, already weakened by the economic and financial crisis.