As already mentioned in part one of this article, the New Consumer Credit Act No. 257/2016 Coll., on consumer credit, becomes effective as of 1st December 2016 and brings not only newly defined conditions under which a non-banking provider of consumer loans will be allowed to conduct its business but also the increased level of consumer rights and their protection.
HIGHER LEVEL OF CONSUMER PROTECTION
New obligations imposed upon both, banking or non-banking providers, such as:
- higher degree of mandatory checking of the creditworthiness of the loan applicant;
- extended list of mandatory information that is to be provided to consumers (e.g., explanation of pre-contractual information, information about changes of the interest rate, etc.);
- restrictions of certain contractual terms and conditions (e.g. prohibition to use a phone number with higher than standard price, financial security of the credit only in proportion to the value of the secured debt, etc.);
- new regulation concerning the termination of the contract, premature repayment and payment default of the consumer.
Premature repayment: The consumer is newly entitled to repay his loan partly or as a whole at any time during the loan term. However, the creditor is entitled to apply for a compensation of reasonably incurred costs in connection with the premature repayment of the loan.
The compensation in the case of consumer credit, except for mortgage loans, must not exceed the amount of 1% of the prematurely paid part of the total loan amount if the period between the premature payment and the agreed term of the loan exceeds 1 year, and must not exceed the amount of 0.5% if this period is shorter. In the case of consumer credit relating to residential immovable property, the creditor’s compensation must not exceed the amount of 1% of the prematurely paid part of the credit, up to a maximum amount of CZK 50,000. The amount of the compensation is further restricted.
In case the consumer is in default with payment only the following sanctions can be applied:
- provider’s right to compensate reasonable incurred costs in connection with the consumer’s default;
- default interest, which must not be higher than statutory interest; or
- a contractual fine.
The contractual fine must not exceed the amount of 0,1% per day of the default sum. The total amount of all applied contractual sanctions must not exceed the multiple of 0.5 and the total amount of the consumer credit, up to a maximum amount of CZK 200,000.