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NFI interest cap regulations will be implemented starting November 11, 2024. Discover the interest caps you can benefit from and your rights in case of assignment of a contract to debt recovery entities.

Published on August 13, 2024 in the Official Gazette, Law No. 243 of August 12, 2024 on the protection of consumers regarding the total cost of credit and the assignment of receivables will enter into force on November 11, 2024.

The long-anticipated consumer protection legislation was enacted and published in August this year. It introduces stringent provisions aimed at safeguarding Romanian consumers from usurious interest rates applied by non-bank financial institutions (NBFIs). Furthermore, it addresses excessive indebtedness arising from the assignment of claims to entities engaged in debt recovery activities.

Law 243/2024 becomes applicable in the context of the identification in the credit agreement of an annual percentage rate of charge (APR). which exceeds the limits set by it. The limitation of the annual percentage rate of charge is regulated according to the type of contract concluded. Examples are mortgage credit for real estate investment and consumer credit (also referred to as personal needs credit).

In the case of mortgage loans for real estate investment, strict APR limits apply. The APR must not exceed by more than 8 percentage points the interest rate used by the National Bank of Romania. This refers to the credit facility interest rate on the domestic financial-banking market.
For consumer loans, the APR may not exceed by more than 27 percentage points the same benchmark interest rate.

Limits on the interest charged per day on consumer credit

Depending on the amount of the consumer credit, Law 243/2024 provides, by way of exception, limits on the interest charged per day on consumer credit.

• Thus, for consumer credit up to a maximum amount of 5,000 lei, 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 amount of the credit.

• Consumer credit has a value between 5,001 lei and 10,000 lei, the total cost of credit 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 amount of credit.

• As regards consumer credit for amounts between RON 10 001 and RON 25 000, the total cost of credit 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 amount of credit.

The consumer may request the reduction and rebalancing of the credit agreement under Law 243/2024. This may be done amicably, through the courts, or via an alternative dispute resolution entity. Examples include CSALB (Banking Sector) or SAL-Fin (Non-bank Financial Sector). The consumer may initiate the procedure directly or through a consumer association. Settlement outside court is also permitted through alternative dispute resolution.

Procedure for reviewing the credit agreement

The request for an amicable review is the consumer’s first option for limiting credit costs. The consumer may ask the financial creditor to review the agreement. The financial creditor is obliged to respond in writing within 30 days. The response must contain a proposal for review of the agreement. This proposal must consider the consumer’s financial situation, including the maximum level of indebtedness.

The contract revision proposal shall be submitted by the financial creditor. It must include a reduction or partial cancellation of some of the consumer’s obligations. It may also involve the rescheduling or refinancing of those obligations. Where applicable, it may include the payment in lieu of the mortgaged real estate. This must comply with Law no. 77/2016 on payment in lieu of property to settle loan obligations. The law applies as subsequently amended and supplemented.

The consumer will be able to request the competent court to judicially adapt the contract

In the event of an explicit refusal of the request for an amicable revision of the contract, or if there is a delay of more than 45 days in replying to such a request, the consumer has the right to apply to the competent court. The consumer may seek judicial adaptation of the contract.

If the court rejects the request for judicial adaptation of the contract, the financial creditor may claim costs. However, this is only possible if the claimant made the request in bad faith. These costs include interest, commissions, penalties, and other incidental costs of the claim.

The application for judicial adjustment of the credit agreement is not subject to the procedure for regularization of the claim governed by Article 200 of the Code of Civil Procedure.

The procedure also applies in cases where claims arising from credit or loan agreements have been assigned or otherwise outsourced by the credit institution or non-bank financial institution to a third party.

The action for contract revision under the above procedure does not exclude the application of Law No. 193/2000. This law addresses unfair terms in contracts between professionals and consumers. It also does not preclude the provisions of Law No. 363/2007. This law focuses on combating unfair business-to-consumer practices and aligning regulations with European consumer protection legislation.

This law is applicable to contracts signed after November 11, 2024. It also applies to contracts in progress. This includes contracts active on the date of entry into force of the law. The law applies to contracts that are maturing. It covers contracts with payment arrears of 60 days or less.

Stricter rules for assignment of receivables in credit agreements granted by NFIs.

At the time of the transfer of an individual claim or within a portfolio of claims, the consumer has the right to be informed. The consumer must be provided with supporting documents detailing the amount owed.

According to this law, the debt recovery entity may not charge the debtor a total amount exceeding the claim. This includes the amount of the claim certified by the creditor at the time of the assignment agreement. It also includes any expenses related to the recovery of the credit. This includes the costs of enforcement as well.

The amount of the claim shall include all costs, including interest, penalty interest, commissions, fees, and charges. It shall also cover any other type of costs to be borne by the consumer in connection with the credit agreement. These costs must be known to the creditor and calculated at the time of the assignment of the credit agreement. The creditor must present a written breakdown of these costs to the consumer.

Retroactivity of Law 243/2024: Constitutional Court’s Interpretation

Although legal specialists have drawn attention to the retroactivity of Law 243/2024 with regard to outstanding credit agreements, the Constitutional Court of Romania, in its a priori constitutionality review, established in Decision No 379 of July 11, 2024 (paragraph 90) that “according to its case law, (…. )[1], a law is not retroactive when it modifies for the future a previously existing legal situation, nor when it abolishes the future effects of a legal situation created under the old law, because in these cases the new law merely regulates the course of action in the time following its entry into force, that is to say, within its own sphere of application. It follows that the retroactivity of the law concerns the modification of a situation for the past and not the different regulation of a legal situation for the future.”

Conclusion

Finally, it will be demonstrated in practice whether Law 243/2024 is effective in discouraging financial creditors. It aims to prevent charging excessive interest or other forms of economic abuse. It also seeks to prevent abusive or irresponsible behavior in consumer relations.

[1] “concretized, for example, by Decision no. 330 of November 27, 2001, published in the Official Gazette of Romania, Part I, no. 59 of January 28, 2002, or Decision no. 1.622 of December 20, 2011, published in the Official Gazette of Romania, Part I, no. 156 of March 8, 2012”