Credits for real estates of consumers
On 14.07.2016, the National Assembly adopted on second reading the Law on Credits for Real Estates of Consumers, which was promulgated on 29.07.2016.
This law regulates the requirements for granting credits for real estates of consumers, and the conditions and the procedure for registration of credit intermediaries and the control over them.
The law aims to:
1. ensure consumer protection by creating conditions for making an informed decision when obtaining credits for real estates of consumers;
2. ensure conditions for responsible behavior of the creditors and credit intermediaries in providing credits for real estates of consumers;
3. encourage responsible behavior of the consumers in obtaining credits for real estates in order to prevent their excessive indebtedness.
Credits for real estates are credits secured by a mortgage or another comparable collateral over immovable property and credits whose purpose is acquisition or retention of a real right over a real estate.
The contract for credit for a real estate is a credit agreement on the basis of which the creditor grants or commits to provide the consumer credit in the form of a loan, deferred payment or other form of payment facilities.
The contract for credit is concluded in writing, on paper or on another durable medium. The contract for credit may be concluded and by means of distance communication. Upon contracts for credit with general conditions the general conditions are an integral part of the contract. Upon a contract for credit with a variable interest rate the creditor applies a reference rate specified by his methodology. The creditor notifies the consumer on paper or on another durable medium about any change in the interest rate before the entry into force of the change. The creditor may collect from the consumer fees and commissions for additional services related to the credit agreement.
The creditor is a credit or financial institution under the Law on Credit Institutions.
The consumer is any natural person who at the conclusion of a contract for credit for a real estate acts outside his trade, business or professional activity.
The credit intermediary is a person who doesn’t act as a creditor or notary and connects directly or indirectly a creditor with a consumer or credit intermediary and in carrying out his business activity:
a) presents or offers to consumers credit agreements within the meaning of this law, or
b) assists to consumers by carrying out other types of preparatory or pre-contractual actions on credit agreements within the meaning of this law, or
c) concludes with consumers on behalf of the creditor credit agreements within the meaning of this law.
The provisions of this law are not applied to:
1. contracts of financing against property in which the creditor provides the consumer with a lump sum, periodical and/or other payments against the receipt of a sum arising from a future sale of a real estate or a real right over a real estate and in which return of granted sums is not required until the occurrence of one or several specified events in the consumer’s life, unless the consumer does not fulfill his contractual obligations, entitling the creditor to terminate the contract;
2. contracts for credit provided by the employer to workers and employees which contracts are outside the scope of his main activity, in which interest is not charged or the annual percentage rate (APR) is lower than the percentage prevailing on the market and which are not offered to other persons;
3. contracts for credit in which interest and other expenses for the consumer are not charged with the exception of the expenses directly related to the securing of the claim;
4. contracts for credit in the form of overdraft, when the credit must be repaid within one month;
5. contracts for credit which are as a result of dispute resolution before court or other authority established by law;
6. contracts for credit relating to deferred payment of an existing debt for which the consumer does not owe expenses and which are not secured by a mortgage or another comparable collateral over immovable property;
7. contracts for credit concluded with a limited group of persons under the statutory provisions in public interest which are without interest or with interest lower than the interest prevailing on the market or under other conditions that are more favorable for the consumer than the conditions prevailing on the market;
8. contracts for credit concluded by mutual aid funds and cooperatives with their members, without interest or at interest lower than the interest prevailing on the market.
