Consumer Credit

1. General

In the case of credit agreements concluded by consumers the GEO 50/2010 is applied, with subsequent  amendments and completions, transposed into Romanian legislation by the 2008/48/EC Directive. These provisions are completed by those contained in Ordinance 21/1992, as amended and supplemented.

With certain exceptions, strictly defined by law, the legal provisions are applicable to all credit contracts concluded between consumers and creditors after the entry into force of GEO 50/2010. So, among others, the credit agreements for personal needs and real estate or mortgage contracts, are also included, without there being any limit to the granted amount.

  • renting or leasing, when the obligation to purchase the object of the contract is determined nor by the agreement itself or by another separate contract;
  • credit agreements as “overdraft”, on which the loan must be repaid within one month;
  • credit agreements where the credit is granted free of interest or any other charges, and credit agreements with a repayment period of 3 months and for which only insignificant charges are payable. By insignificant costs it means costs up to 0.5% of the credit agreement;
  • credit agreements granted by an employer to his employees as a secondary support for them, without interest or with an annual percentage rate lower than those prevailing on the market and which generally are not offered to the public;
  • credit agreements concluded with investment companies, in order to enable an investor to carry out a transaction relating to one or more financial instruments, when the investment company or the credit institution that grants the credit is involved in such a transaction ;
  • credit agreements that are the result of a decision made by a court or other authority established by the law;
  • credit agreements related to the delaying, entitled as free, of the payment of an existing debt, excluding the restructuring contracts, rescheduling and so on;
  • credit agreements which require the consumer, on conclusion, to provide a movable thing, as security, and where the liability of the consumer is strictly limited to the particular movable thing provided as guarantee. Excluded from this category are the credit agreements under which the property offered as security is the financed thing itself;
  • credit agreements related to :
  • loans granted to a restricted public, on the basis of a legal provision of general interest;
  • interest rates lower than those prevailing on the market or free of interest, or on terms that are more favorable to the consumer than usually and at interest rates lower than those prevailing on the market.

2. Pre-contractual information

The standard information is required to be included in any form of advertising – radio, TV, newspapers, etc.

Standard information shall specify, by means of a representative example, the following:

  • the fixed and / or variable borrowing rate of the credit, together with information on any charges included in the total cost of credit;
  • the total amount of credit;
  • the annual percentage rate;
  • duration of the credit;
  • in the case of a credit in the form of deferred payment for a specific good or service, the purchase price and the amount of any advance payment;
  • if applicable, the total amount payable by the consumer and the value of the rates.

In any kind of advertising, the information must be written in a clear, concise, visible and easy to read, in the same visual field and with characters of the same size.

If the conclusion of a contract regarding an ancillary service relating to the credit agreement, particularly an insurance, is compulsory to obtain the credit itself or to obtain it according to the terms and conditions, and the cost of that service can not be determined in advance, the obligation to conclude such a contract is also stated clearly, concise and visible, along with the annual percentage rate.

Pre-contractual information must be provided on paper or on any other durable medium, written clearly and easy to read, using the Times New Roman font, 12p minimum. Lenders must use “the Standard European Consumer Credit Information”.

Information should be provided enough time in advance, but not less than 15 days before the consumer concludes into a credit agreement or offer.

Pre-contractual information must be written so as not to mislead consumers by the use of technical expressions, legal or specific to banking domain, using abbreviations or initials of some names, except those provided by law or ordinary language. Technical terms will be explained at the request of the consumer, in writing, no extra charge.

Pre-contractual information include the following:

  • the type of credit;
  • the identity and the address of the registered office and workstation of the creditor and, where appropriate, identity and address of the registered office and / or workstation or, where appropriate, the home address of the credit intermediary involved;
  • total amount of credit and the conditions governing the drawdown;
  • duration of the credit;
  • for a credit in the form of deferred payment for a specific good or service, and in the case of related credit agreements, the good or service and its purchase price must be speicifed;
  • the borrowing rate;
  • the conditions governing the application of the borrowing rate, the formula for calculating the interest rate and terms, the conditions and procedure for changing the borrowing rate and, where different borrowing rates are applicable in various circumstances, all the above for every applicable rate;
  • annual percentage rate and the total amount payable by the consumer, illustrated by a representative example mentioning all the assumptions used to calculate that rate; if the consumer informed the creditor of one or more components of his preferred credit, such as the duration of the credit agreement and the total value of the loan, the creditor must consider these components;
  • the amount, number and frequency of payments to be made by the consumer and, where appropriate, the order in which payments will be allocated to reimbursement of various outstanding balances with different rates of borrowing;
  • charges for maintaining one or several accounts recording both payment transactions and drawdowns, unless the opening of an account is optional, together with costs of using a means of payment for both payment transactions and drawdowns, any other charges being derived from the credit agreement and the conditions under which those charges may be changed;
  • existence of taxes, fees and costs which the consumer has to pay in relation with the conclusion, advertising and / or registration of the credit agreement and any ancillary documents, including notary fees;
  • the obligation, where appropriate, to conclude a contract on an ancillary service relating to a credit agreement, an insurance in particular, if the conclusion of the service contract is mandatory to obtain the credit itself or to obtain it in accordance with the terms and conditions presented;
  • the interest rate applicable to late payments and the arrangements for its adjustment and any other costs incurred in the event of breach of contract;
  • a warning stating the consequences of missing payments. Warning must contain, necessarily, the terms that the reportings are to be done to the credit bureau and the minimum term at which the creditor may initiate enforcement proceedings;
  • the required sureties;
  • the existence or absence of a withdrawal right;
  • right of early repayment, and, where appropriate, information on the creditor’s right to compensation and how will it be determined;
  • consumer’s right to be informed immediately and without charge of the result of a database consultation to assess his creditworthiness;
  • consumer’s right to request and receive a copy of the draft credit agreement. This provision shall not apply if the creditor, when demanded, can not conclude the credit contract with the consumer under its internal rules;
  • consumer’s right to receive a free copy of the draft credit agreement for loans secured by mortgage, with another comparable security or a right in immovable property and credit agreements whose purpose is the acquisition or preservation of ownership rights of an existing or projected immovable good, or renovating, development, reconstruction, extension or increase of the value of a property.
  • if necessary, the period in which the pre-contract information are legally binding.

Consumers have the right to request and receive a copy of the draft credit agreement. However, if the consumer can not conclude the contract with the lender as a result of its internal rules, the consumer can not require a draft credit agreement.

Within 30 days of submission of the credit file, but not more than 60 days after submission of the request for credit, the creditor shall respond in writing to the consumer or the consumer’s express request, the other form of consumer choice and accepted by the lender on or not to grant credit.

On credit receipt and other documents required, the financial service provider is obliged to immediately hand the consumer a written, dated, signed and registration numbered paper  containing the lender’s confirmation that he received all documents required by the granting of the credit.

3. Credit agreement

Credit agreement clearly and concisely specify the following:

  • the type of credit;
  • the identity and address of the registered office and workstation / home address of the contracting parties and, where appropriate, identity and address of the registered office and / or workstation or, where appropriate, the home address of the involved credit intermediaries ;
  • the timespan of the credit;
  • the total amount of credit and the conditions governing the drawdown;
  • for a credit in the form of deferred payment for a specific good or service, or in the case of linked credit, the  good or service and its purchase price;
  • the borrowing rate and its type, fixed or variable;
  • the conditions governing the application of the borrowing rate, formula, as well as the terms, conditions and procedure for changing the borrowing rate and, in the case of different borrowing rates for various circumstances, all the above information on any applicable interest rates;
  • the annual percentage rate and the total amount payable by the consumer, calculated at the conclusion of the credit contract; all the assumptions used to calculate this rate must be specified as well;
  • the amount, number and frequency of payments to be made by the consumer and, where appropriate, the sequence in which payments will be made, in order to repay for various outstanding balances with different rates of borrowing;
  • in case of reimbursement through rates of the total amount of the credit corresponding to a credit agreement for fixed term, the consumer’s right to receive, upon request and free of charge, at any time throughout the duration of the credit agreement, on paper or on another durable medium, according to the consumer decision, a statement of account in the form of an amortization table / chart for reimbursement;
  • if the charges and interest rates are to be paid without refunding any part of the total loan, a statement showing the periods and conditions for payment of interest and any borrowing costs must be included;
  • the costs for maintaining one or several accounts recording both payment transactions and drawdowns, unless the opening of an account is optional, charges for using a means of payment for both payment transactions and for drawdowns, any other charges deriving from the credit agreement and the conditions under which those charges may be changed;
  • the interest rate for late payments as applicable at the credit agreement and the arrangements for its adjustment and, where applicable, any charges payable for default;
  • a warning regarding the consequences of missing payments; the credit agreement will contain a provision that warns the consumer about credit bureau reporting, CCR and / or other existing similar structures, in case of delaying the payment of the rates , if this report is mandatory;
  • if applicable, a statement that will be required the payment of some taxes, fees and charges related to the conclusion, advertising and / or registration of the credit agreement and ancillary documents, including notary fees;
  • the required sureties and insurance, if any;
  • the presence or absence of a right of withdrawal, the period during which that right may be exercised and other conditions for exercising it, including information concerning the obligation of the consumer to pay the loan or credit and interest held;
  • right of early repayment, prepayment procedure and, where applicable, information concerning the creditor’s right to compensation and how compensation will be determined;
  • procedure to be followed in exercising the right to terminate the credit agreement;
  • whether or not an extrajudicial mechanism for consumer complaints and compensation and, if so, how to access it;
  • other contractual terms and conditions;
  • the address of  the National Authority for Consumer Protection.

Credit agreement must be in writing, visible and easy to read, the font used is Times New Roman, size of less than 12 p, on paper or on any other durable medium. If the contract is written on paper, the color of paper on which is written the contract must be in contrast with the font used.

Credit agreements must contain complete information, clear and easy to understand, in Romanian. This information will be detailed or further explained by the bank or at the express request of the consumer, before signing as a note attached to the contract.

At the time of signing the contract, all contracting parties shall receive a copy of the original credit agreement, except for distance contracts.

For the loan, the lender may charge only: file analysis fee, administration fee or administration fee credit current account compensation for early repayment, insurance costs and, where applicable, penalty interest and other costs charged by third parties and one single fee for services provided to consumer demand.

File analysis fee and unique fee must be set on a fixed amount, the same amount being charged to all consumers with the same type of loan in the same credit institution.

The management fee is charged for monitoring / recording / performing operations by the creditor for the use / refund of the credit given to the consumer. If this fee is calculated as a percentage, it will be applied to the current balance of the loan.

The increase of the level of commissions, fees and bank charges, excluding the costs imposed by legislation is totally forbidden.

The placing and charging of new fees, charges or any other bank charges, excluding specific costs of additional products and services specifically requested by the consumer, not stated in the contract or who were not offered to consumers at its conclusion is forbidden. These unexpected costs will be levied only on the basis of additional documents accepted by the consumer. Excluded are the costs imposed by legislation.

Is prohibited to charge a fee for paying cash deposit rates on credit, whether submission is made by the holder or by another person.

It is forbidden to withdraw a commission for amounts drawn from credit.

It is prohibited a commission, a charge of bank charges or any other costs, if the consumer wishes to change the date of maturity of the installments.

It is forbidden to charge fees in situations where consumers are demanding guarantees changing, while the consumer pays all costs associated with the formation and evaluation of new guarantees.

The costs of current account can be changed. Costs of the current account must correspond to the actual costs of the creditor, must limit their coverage and must not lead to additional revenue for it.

For any change in the level of credit costs, according to contractual terms, the lender is required to notify the consumer in writing or, at the express request of the consumer, other means determined by it and approved by the lender and this will provide a new amortization table / reimbursement schedule.

In variable-rate credit agreements shall apply the following rules:

  • interest will be composed of an EURIBOR / ROBOR / LIBOR benchmark index to a certain period or rate of the National Bank of Romania, according to the currency of the loan, and a margin fixed throughout the course of contract, added by the lender;
  • according to the policy of each credit institution, the creditor may reduce margins and / or apply a lower level of the reference index, thus having the right, during the contract, to return to the value of the margins specified in the contract by the completion date , and / or to the actual level of the reference index;
  • calculation of interest should be expressly stated in the contract, specifying periodicity and / or the conditions under which variable interest rate change occurs, both upwards and downwards;
  • the elements that enter into the calculus formula of the variable interest rate and their values will be displayed on the internet sites and all sites of creditors.

The contractual terms that entitle the lender to modify the terms of the contract unilaterally without concluding an amendment accepted by the consumer, are forbidden.

It is forbidden to place clauses in credit agreements by which:

  • the consumer is required to maintain the confidentiality provisions and contractual terms;
  • the creditor may declare due, withdraw unilaterally from the contract or may penalize the consumer for damaging the reputation of the creditor;
  • the creditor may declare the loan due in advance if the consumer has not fulfilled his obligations under other loan agreements concluded with other creditors;
  • the lender imposes to the consumer the conclusion of the contract of assurance of goods guaranteed by a society accepted by the bank.

Creditors have the right to refuse the collection of rates in the currency in which the credit has been loaned, excluding operators who conclude leasing contracts.

Any notification on changes of the contractual clauses concerning costs will be passed to consumers at least 30 days prior to their application, unless the consumer requests changes to the contract that require other costs, such as extension of credit or amendment rates.

Any notice of the creditor to the consumer must be signed, dated and registration numbered. Any notice that does not contain the minimum information is deemed null and void.

The consumer shall have a period of 15 days after receipt of the notice to communicate his acceptance or non-acceptance of the new terms. No response from the consumer within the period referred to above is not considered tacit acceptance and so the contract remains unchanged.

If the consumer does not accept the new conditions, the creditor has no right to penalize the consumer or to declare the loan due.

Creditors are required to receive and record complaints from consumers, to take all necessary steps to respond to these complaints within 30 days of their registration and shall endeavor to repair any damage caused to the consumers.

Upon termination of the credit agreement, the creditor offers the consumer, free by default, a document certifying that all obligations of the parties arising out of contract were either settled or indicates unfulfilled contractual obligations. At the same time, credit accounts also close, without requiring the submission of another application for the consumer and without payment of additional costs, except for the following situations:

  • current account has been opened before credit contraction, in order to carry out other operations;
  • by the credit termination date, the current account is used for other services contracted by the consumer;
  • accounts are seized or frozen, according to law, to meet the consumer of obligations owed to the creditor himself or third parties.

4. Right of withdrawal

The consumer has a period of 14 calendar days in which to withdraw from the credit agreement without any reason. It does not apply to linked credit contract, given exclusively for the purchase of goods or services and to leasing contracts.

The deadline for withdrawal shall begin from one of the following:

  • the conclusion of the credit;
  • the date on which the consumer is aware of the terms, conditions and contractual information, if that day is later than the conclusion of the credit agreement.

If the consumer exercises his right of withdrawal, he shall:

  • notify the lender based on the information provided, for the exercise of this right takes effect before the expiry of the withdrawal;
  • pay the loan to the creditor or a part of it, along with the related interest held after the date on which the loan or the credit party was held until the credit or that part of the loan is repaid; the interest rate will be calculated based on agreement.

Notification:

  • is on paper or on other durable medium that is available and accessible to the creditor;
  • is transmitted by means legally permissible, providing transmission of text document and confirmation of its receipt;
  • is dispatched before the deadline expires.

The exercise of the right of withdrawal shall take effect beginning with the date of dispatch of the notice by the consumer.

The payment of the loan to the lender or a part of it along with the interest rate, shall be held without undue delay and no later than 30 calendar days after sending notice of withdrawal to the lender.

The creditor is not entitled to any other compensation from the consumer in case of withdrawal, except compensation for any nonrefundable fee paid by the creditor administration.

5. Early repayment

The consumer has the right, at any time, to discharge fully or partially his obligations under a credit agreement. In this case, the consumer is entitled to a reduction in the total cost of credit, such reduction consisting of the interest and costs for the period between the early repayment and termination date for credit.

Consumer’s right to early repayment may be subject to payment of a specified minimum amount or a specified number of installments.

In case of early repayment of the loan, the creditor is entitled to a fair, objectively justified compensation for possible costs directly linked to early repayment  of the credit, provided that the early repayment to be made in a period in which the borrowing rate is fixed.

Such compensation shall be at most:

  • 1% of the loan amount repaid early, if the period between the early repayment and the agreed date of termination of the credit agreement exceeds one year;
  • 0.5% of the loan amount repaid early, if the period between the early repayment and the agreed date of termination of the credit is more than one year.

The creditor establishes a clear and verifiable method for calculating the compensation, which will be made known to the consumer since the pre-contractual stage.

No compensation for early repayment is required in any of the following:

  • repayment has been made ​​following the execution of a contract of insurance which aims to ensure the risk of default;
  • the credit contract is concluded as “overdraft”;
  • repayment falls within a period in which the borrowing rate is not fix.

Any compensation shall not exceed the amount of interest the consumer would have paid during the period between the early repayment and the agreed date of termination of the credit.

6. Annual Percentage Rate

The annual percentage rate represents the total cost of the credit expressed as an annual percentage of the total loan.

The following are included in the total cost of credit:

  • the maintenance costs of an account that record both payment transactions and drawdowns;
  • the costs of using a means of payment for both payment transactions and drawdowns;
  • other costs relating to payment transactions.

Not included in the total cost of credit, are the following:

  • the costs mentioned above, when opening an account is optional and account costs have been clearly and separately shown in the credit agreement or any other contract with the consumer;
  • costs incurred by the consumer for non-compliance with any of his commitments laid down in the credit agreement;
  • other costs, except the purchase price which, for purchases of goods and services, the consumer is obliged to pay whether the transaction is done in cash or on credit.

More information about APR can be found on the www.totuldespredae.ro website.