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Changes in consumer credit conditions
On June 10, 2017 the Law of Ukraine No. 1734-VIII “On Consumer Credit” (hereinafter – the Law) came into force, according to which the consumer credit conditions were changed. What is clear for now is that any loan consists of the loan itself and the cost of its maintenance. In the following article, written by the tax advisor Oleksandr Semenyuk, you can read about the reasons why the proposed changes are progressive, and how to protect consumer rights in consumer loan.
Quite significant is an introduction of the notion of the “real annual interest rate” – an actual “value” of the loan, expressed as a percentage (in contrast to the nominal interest rate, actually hides the real situation from a consumer). Advertising of consumer credit should now be understandable and accurate.
The norm on including in the general costs of related services attracts an interest. In case if at the conclusion of a credit agreement the bank did not informed the consumer of related services, then in future the consumer has the right not to pay these related services. The law establishes the consumer’s right to renounce a consumer credit agreement within 14 calendar days from the date of the conclusion of the contract.
The law introduces a peremptory norm that prohibits complicating the consumer’s reading of the real annual interest rate and the total cost of credit for the consumer, specified in the consumer credit agreement or in the annex to such a contract, in any way. It is also prohibited printing text in a font smaller than the main text, merging the font color with the background color.
The law contains the consumer’s liability under the consumer loan agreement. In consumer credit agreements, a penalty for failure to fulfill the obligation to repay a loan and interest thereon cannot exceed the double discount rate of the National Bank of Ukraine in force during the period for which the penalty is paid, and there cannot be more than 15 percent of the amount of the overdue payment. The aggregate amount of the forfeit (fine, penalty) accrued for the violation of obligations by the consumer on the basis of the consumer credit agreement cannot exceed half of the amount received by the consumer under such a contract, and cannot be increased by agreement of the parties.
Thus, the right of the bank to dig the consumer deeper into a financial hole is strictly limited. This is a very positive aspect. After all, in practice, there were situations when the bank required collection of debts from the consumer, and the amount of the penalty was several times higher than the amount on the loan and interest.
In general, the adopted law contains norms that increase the responsibility of banks to consumers and obliges banks to provide more detailed information on credit services both during the conclusion of a credit agreement, and throughout the term of the provision of credit services.
In this context, it should be added that in connection with the entry into force of the above norms, the NBU Resolution No. 49 dated June 8, 2017 approved new rules for calculating the total cost of credit for the consumer and the real annual interest rate under the consumer credit agreement by the banks of Ukraine. Thus, the previous NBU Resolution No. 168 dated May 10, 2007 is no longer valid.