Law 243/2024 on Consumer Protection in regards to the Total Cost of Credit and the Assignment of Receivables (“Law 243”) was published in Official Gazette no. 807/13.08.2024 and shall enter into force 90 days from the date of publication.
Scope of Application: This law applies to legal relationships between consumers, non-banking financial institutions, and entities engaged in debt recovery activities in relation to consumer credit and establishes the rules for the protection of consumers against excessive interest rates with the aim of maintaining contractual balance and ensuring the integrity of the internal financial-banking market.
The status of a consumer acting for personal or family purposes is presumed and analysed in relation to the credit contract that falls under the scope of Law 243, and not to the debtor’s entire activity.
For the purpose of balancing the benefits and reducing the risks generated by consumer credit contracts, the law is also applicable to contracts in progress, i.e., contracts active on the date of entry into force of the law, which are maturing and for which the payment arrears are 60 days or less. Furthermore, all existing consumer credit contracts shall be brought into compliance with the provisions of the law in accordance with the procedure outlined therein.
Limitations imposed on Annual Effective Interest Rate (DAE):
The annual effective interest rate (DAE) on mortgage loans for real estate investment may not exceed by more than 8 percentage points the interest rate charged on lending facilities by the National Bank of Romania.
The DAE on consumer credit must not be more than 27 percentage points of the lending facility interest rate of the National Bank of Romania.
Exceptions to the above rules are:
- for consumer loans up to a maximum amount of RON 5,000 (approximately EUR 1,000), the total cost of borrowing may not exceed 1% per day and, at the same time, the total amount payable by the consumer may not exceed twice the total loan amount;
- for consumer loans amounting between RON 5,001 and RON 10,000 (approximately EUR 1,000 and EUR 2,000), the total cost of borrowing may not exceed 0.8% per day and, at the same time, the total amount payable by the consumer may not exceed twice the total loan amount;
- for consumer loans amounting between RON 10,001 and RON 25,000 (approximately EUR 2,000 and EUR 5,000), the total cost of borrowing may not exceed 0.6% per day and, at the same time, the total amount payable by the consumer may not exceed twice the total loan amount.
Remedies available to consumers against breach of DAE limitations:
If the level of DAE or, where applicable, the total cost of credit per day and/or the total amount payable by the consumer are higher than the ceilings set out above, these levels will be reduced, as appropriate, at the consumer’s request, either amicably, through legal proceedings, or by appealing to an alternative dispute resolution entity.
When the consumer requests the creditor to review the contract, the creditor must provide a written proposal for contract revision within a maximum of 30 days from receiving the consumer’s request, taking into account the financial situation, including the maximum debt-to-income ratio.
The contract revision proposal will include the reduction or partial cancellation of some of the consumer’s obligations, rescheduling or refinancing them, or, if applicable, the surrender of the mortgaged property, in accordance with the provisions of Law No. 77/2016 on the Surrender of Immovable Property to Discharge Obligations Assumed through Loans, with its subsequent amendments and additions.
If there is an explicit refusal of an amicable contract revision request or if there is a delay of more than 45 days in responding to such a request, the consumer may request the competent court to adapt the contract by a court ruling.
From the date of submitting the request for judicial adaptation of the contract, its effects on the consumer will be suspended only if the exceeding of the new thresholds set out for the DAE in Law 243 is confirmed by a decision of the National Authority for Consumer Protection.
If the court rejects the request for judicial adaptation of the contract, the creditor may claim interest, fees, penalties, and other accessories of the debt only if the claimant made the request in bad faith.
Specific unfair commercial practices in connection with interest rates – stipulations
Law 243 expressly provides that the following stipulations in a consumer credit agreement are unfair commercial practices, sanctionable in accordance with Law no. 363/2007, with subsequent amendments and completions:
- stipulating and applying excessive interest rates or clauses regarding the total amount payable by the consumer that result in exceeding the maximum cost ceilings provided in Law 243;
- stipulating and applying penalty interest rates that exceed the total amount granted as a loan or credit;
- stipulating and applying interest on amounts that include interest, or maliciously concealing interest and compound interest under other names of costs or under provisions intended to regulate other aspects of legal relations with consumers;
- using fees, charges, premiums, or other credit accessories with the intention of concealing excessive interest rates.
PETERKA & PARTNERS Romania remains at your disposal to provide more information and/or related legal assistance connected to this topic.
***
No information contained in this article should be considered or interpreted in any manner as legal advice and/or the provision of legal services. This article has been prepared for the purposes of general information only. PETERKA & PARTNERS does not accept any responsibility for any omission and/or action undertaken by you and/or by any third party on the basis of the information contained herein.
