One of the issues I face writing this blog is the question of what to choose this week. Do I write based on the law firms experience of new cases in Romania the preceding week/months or do I write about new legislation proposed or otherwise. What is interesting for some is not as riveting for others. Such is the position this week.
For instance, the Romanian National Authority for Consumer Protection has submitted a draft law incorporating the relevant provisions of Directive 2014/17/EU. This Directive aims to create a mortgage credit market in the EU with increased consumer protection for both secured credit and home loans. The Directive was adopted on 4 February 2014 and Member States have until 21 March 2016 to transpose its provisions into their national law. There has been much written in the Press and spoken on the television about the hardship brought about by the liberalization of the Swiss Franc and the draft law goes some way to addressing these issues. Like many Romanian law Firms we have received enquiries as to what to do. Thus the new draft law is to be welcomed.
It must be remembered that the draft is a draft law, and as such will no doubt be amended during it’s passage. Even so the provisions of the EU Directive will apply in Romania.
It should also be borne in mind that as this is based on an EU directive some of its provisions have inter-territorial impact and will not be limited to the country in which the Directive has been adopted.
In the draft there are a number of provisions relating to agreements that relate to residential immovable property which all parties should consider now as the draft in some form will be passed and therefore the provisions will have to be implemented in due course. Although not exhaustive such provisions are those relating to:
- The prohibition from including the following clauses in the credit agreements. Confidentiality of the consumer regarding the provisions of the agreement and contractual conditions, cross collateral clauses, clauses requiring the approval of the lender with respect to the insurance company which will insure the property.
- The prohibition from entering into or assigning mortgage agreements in favour of a financial banking/non-banking operator which does not have its headquarters or a branch in Romania;
- The prohibition from enforcing subsequent assets of the debtor.
In addition the draft places an obligation on the relevant bodies to provide consumers with a sound financial education. It also contains detailed rules on the lender’s obligation to provide to the consumers adequate advice and sufficient information in the context of advertising and the marketing of loans and throughout the whole period of the loan.
There are also other provisions to improve consumer protection and balance credit risk between the lender and consumer. The draft requires lenders to assess the value of the asset in accordance with a predetermined standard; to perform an in-depth assessment of the creditworthiness and suitability of the consumer to take up a loan and finally to ensure that their commercial practice is compliant with legal requirements regarding early loan repayment, foreign currency loans, tying practices, arrears and foreclosures. Some of these provisions will also impact on other draft laws at present before the Romanian Parliament especially the one on individual bankruptcy in Romania.
Finally, despite over twenty years of liberalization of financial matters in Romania there is still much confusion and lack of information relating to financial intermediaries. In Western Europe, and here I speak of the United Kingdom there have been many scandals and issues regarding mis-selling by institutions and intermediaries. The Directive seeks to remedy some of these and the draft includes detailed provisions regarding credit intermediaries who must, amongst others, comply with a series of organizational/structural requirements, be included in a special register held by the NACP and comply with detailed conduct of business rules. None of these are a bad thing if it protects the consumer and allows a vibrant credit market to develop further.
As the law is based on a Directive and has to be implemented it will be in due course. It is hoped that the law will give certainty to the market and allow this aspect of the financial market to develop more fully.