The Romanian National Authority for Consumer Protection (“NACP”) recently published on its web site a legislative proposal to amend of the legal framework relating to credit agreements between Romanian based financial institutions and consumers (i.e. private individuals) (“Proposed Law”).
The amendments are expressly related to Romania’s obligation to implement the legal regulations provided under Directive 2014/17/EU of the European Parliament and of the Council of the EU on credit agreements for consumers. These concern residential immovable property and amends Directives 2008/48/EC and 2013/36/EU and Regulation (EU) no. 1093/2010 (“Directive”).
The Directive creates a more transparent, efficient and competitive internal market, through consistent, flexible and fair credit agreements relating to immovable property. It also promotes sustainable lending and borrowing and financial inclusion, hence providing a high level of consumer protection.
Currently, the Romanian consumer finance market is regulated under the Government Emergency Ordinance no. 50/2010 on credit agreements for consumers. This provides the rights and obligations of parties concerning credit agreements for consumers. It is applicable to all credit agreements concluded between financial institutions and consumers, including credit agreements secured by a mortgage over real estate assets.
The most notable aspects of the Proposed Law are:
– financial institutions will be obliged to keep clients (i.e. consumers) informed about their finance products at least once a year;
– express and/or special requirements regarding the provisions must be included in the credit agreements;
– credit agreements with consumers can no longer be concluded at a distance or outside commercial spaces;
– special conditions have to be fulfilled in order for the credit agreements to be considered enforceable titles;
– any advertising and marketing communications concerning credit agreements must be fair, clear and not misleading, and must include certain standard information;
– consumers will have the right to choose between converting the credit agreement to an alternative currency and be informed of other ways of reducing their credit costs;
– the evaluation of immovable properties can only be conducted by authorised and independent real estate professionals, thus enabling an objective, independent evaluation;
– before foreclosure proceedings are initiated, creditors must exercise reasonable forbearance and make reasonable attempts to resolve the situation through other means;
– registration with the NACP becomes mandatory for real estate developers who intend to grant loans to customers;
– from 21 July 2016, receivables recovery activities can only be conducted by entities registered with the NACP.
The Proposed Law is currently being debated by the Romanian Government. Following the approval of its final form, a Government Emergency Ordinance will be issued, modifying the current applicable legal framework related to the consumer financing market.
Senior Partner STRATULAT ALBULESCU Attorneys at Law