The Romanian National Authority for Consumer Protection (“NACP”) has prepared a draft law (the“Draft Law”) implementing the relevant provisions of Directive 2014/17/EU (the “Directive”) which aims to create an EU-wide mortgage credit market with a high level of consumer protection for both secured credit and home loans. The Directive was adopted on 4 February 2014 and Member States have until 21 March 2016 to transpose its provisions into their national law.
In addition to transposing the provisions of the Directive, the Draft Law contains added provisions (which cannot be waived by consumers) addressing credit agreements for consumers relating to residential immovable property. The main provisions of the Draft Law are:
- Consumer information requirements - in addition to addressing the obligation of relevant authorities to provide consumers with a sound financial education, the Draft Law also contains detailed rules on lender’s obligation to provide consumers adequate advice and sufficient information in the context of advertising and marketing of loans and throughout all phases of the contractual relationship;
- Assessment obligations and commercial practices - to improve consumer protection and balance credit risk between the lender and consumer, the Draft Law requires lenders to (i) assess the value of the asset in accordance with predetermined standards; (ii) perform an in-depth assessment of the creditworthiness and suitability of the consumer; and (iii) ensure that their commercial practice is compliant with legal requirements regarding: early loan repayment; foreign currency loans; tying practices; arrears; and foreclosures;
- Regulation of credit intermediaries – the Draft Law also includes detailed provisions regarding credit intermediaries who must, amongst others, (i) comply with a series of organisational/structural requirements, (ii) be included in a special register held by the NACP and (iii) comply with detailed conduct of business rules.
Even though the Draft Law might still be amended, it is essential that providers of credit agreements for consumers relating to residential immovable property start adapting both their operations and commercial strategy in order to comply with new restrictions, such as:
- The prohibition from including the following clauses in the credit agreements: (i) confidentiality of the consumer regarding the provisions of the agreement and contractual conditions; (ii) cross collateral clauses; (iii) clauses requiring the approval of the lender with respect to the company insuring the immovable asset;
- The prohibition from entering into or assigning mortgage agreements in favour of a financial banking/non-banking operator which does not have its headquarters or a branch in Romania;
- The prohibition from enforcing subsequent assets of the consumer in addition to the proceeds from the sale of the immovable asset.