New regulation is introduced by the Act No. 257/2016 Coll., on consumer credit, which becomes effective as of 1st December 2016.
The new legislation represents the transposition of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and contains primarily the regulation of increased requirements necessary for the start of a business in the field of granting or intermediating consumer loans, and furthermore sets the rules for performance of these activities, which are made much stricter than up to now.
The existing legal regulation, i.e. the Consumer Credit Act No. 145/2010 Coll., is cancelled.
The main changes relate to regulation of conditions under which a non-banking provider of consumer loans will be allowed to conduct its business and also increase the level of consumer rights and their protection.
NON-BANKING PROVIDERS OF CONSUMER CREDIT
Under the existing regulation the majority of the non-banking providers of consumer credit performed their activities on the basis of a trade license and had been under the supervision of the Czech Trade Inspection Authority (Česká obchodní inspekce). Pursuant to the new law, non-banking providers of consumer credit shall be entitled to conduct their business only on the basis of a special license granted by the Czech National Bank (Česká národní banka), which will also become the regulator.
There will be a transitional period for non-banking providers to acquire the license (maximum 18 months as of the effective date of the new law). The application for the license itself has to be submitted in the 3-month period as of the effective day of the new Act, i.e. by 28.2.2017.
Fundamental conditions for the license:
- the applier is a joint-stock company, a European company, or a company with limited liability;
- is trustworthy and has appropriate qualification;
- has a supervisory board with certain powers;
- has registered capital of minimal amount of CZK 20,000,000;
- has drawn up documents containing a variety of suitable processes and rules (e.g. for inspection of the creditworthiness of the consumers, for handling complaints, for dealing with consumers that are in delay with their payments);
- has a business plan based on a realistic economic calculation;
- has a transparent origin of financial sources.