DEPUTY DANIEL ZAMFIR:  "The law of giving in payment will also apply to loans sold to debt collectors"

The law of giving in payment would also be set to apply to loans sold to debt collectors, liberal deputy Daniel Cătălin Zamfir, the initiator of the legislative project told us on Friday. "The loan is still ongoing for the people being pursued by debt collection agencies. The effects of the loan do not end in that particular situation and it will obviously come under the effect of the law. Besides, given the fact that debt collectors are buying these properties are very low prices, and they then foreclose on them and sell them at much higher prices then what they paid for the debt, the application of the law will not cause them losses. There are also cases where the bank has already foreclosed on the property before selling the non-performing debt, but debt collection agencies buy uncertain debts anyway. After the application of the law of giving in payment, the debt recovery actions of the debt collectors will be stopped".

Daniel Zamfir claims that loans assigned outside the country would come under the effect of the law that he initiated: "When a debtor is unable to make their payments, they notify the bank to give the mortgage in payment, and then they go to the notary and they give back the property in payment to the entity that they signed the loan agreement with. Not to mention that in most cases, banks have assigned the loans to some entities within the group".

However, Adrian Vasilescu, a strategy consultant with the NBR, has a different opinion, and he also states that national laws don't apply in other countries.

He said: "The assignment or the sale of loans represent an issue that has raised many questions. In modern codes of law, the loan can be separated from the lender, which was not allowed in Roman law. The sale of a loan can not be prevented by anybody - not by the president, not by the government and even less so by the NBR.

As for the law of giving in payment, I personally don't think that this can be applied to the cases of assignment of receivables outside the country, because as far as I know our laws can only apply in Romania, not on the territory of other countries. Concerning the non-performing loans sold to Romanian debt collectors, it might apply, but it is unclear to me that the legislation may stipulate the fact that debtors appearing in such a transaction, namely the sale of loans, would no longer be considered «consumers». And then, the question arises whether the law, which is aimed strictly at consumers, would still apply to them. If the debtors remain «consumer», then yes, I suspect that the law can also apply to loans sold to debt collectors that operate in Romania".

Mr. Vasilescu warned that in the coming days, the Legal Commission should be more careful with all of these aspects at the time of the approval of the law.

Last week, the initiators of the law of giving in payment, the representatives of consumers and the MPs have agreed on having the law apply to mortgage-backed consumer loans as well. "The PSD has agreed for the law not to apply only to those that live in the property put up as collateral, but also to consumers that have taken out mortgage-backed consumer loans for the acquisition, construction or the decoration of a property used for residential purposes", Mr. Zamfir told us".

Adrian Vasilescu thinks that it will be very hard to decide who the beneficiaries of such loans are going to be: "Consumer loans are for personal needs, meaning they can be taken out for any need. They can be guaranteed with a mortgage and in order to fall under the rigors of the law, first of all the beneficiaries must meet this criterion - to be guaranteed with a mortgage. After that, they need to prove that the loan was taken out to build/arrange a home. I don't know, that may sometimes be mentioned in the contract and sometimes it may not, loan agreements are diverse".

The parties involved have also decided that the law will also apply to debtors that have already been foreclosed on, meaning that the garnishment of the borrowers' income will be lifted.

The law of giving in payment will not apply to those who have borrowed under the First Home program, according to deputy Zamfir, who further: "As for the cap on the loan amount, the representatives of the PSD are open to raising it to 250,000 Euros. If this unconstitutionality exception is lifted and the Constitutional Court finds it unconstitutional, then the cap will be lifted".

Economic analyst Florin Cîţu thinks that even though it is limited, this version of the law still preserves the essence of the initial version.

Nevertheless, Mr. Cîţu states: "I think that the cap, regardless of how high it is, and the elimination of the First Home program are discriminatory measures and it is not normal to discriminate through the law. Everyone is saying that the rate of non-performing loans of the "First Home" program is low, but there is no guarantee that it will remain so. In a few years, if we get a new crisis, people with loans taken out through the First Home program could end up in a situation where they are unable to make their payments and then the non-performing loan ratio will rise. Let's see how that problem is going to be fixed then! Then it is going to be the turn of those affected by that issue that will need to talk to the NBR, because it is stupid to say that now, the level of non-performing loans is low and there is no need for the law to cover that segment".

In the opinion of Florin Cîţu, the giving in payment of the property used as collateral should only be the final step, taken at a critical moment, after the debtor proves that they have no other way of repaying their loan. The analyst claims that from that point of view, a law of personal bankruptcy including the law of giving in payment would have been much better. He thinks that the legislative initiative would be far more easily approved if it were to stipulate that in the event of foreclosure, the bank no longer has the right to pursue the debtor for the outstanding amount.

"In its current form, the law allows for interpretations", he concludes, and he stressed that it is an "incredibly great abuse" for the bank to foreclose on a property without any recourse, based on an enforceable loan agreement, and then to continue pursuing the customer.

The legislative initiative will be put up for debate in the Legal Commission of the Chamber of Deputies on Thursday, March 31st. The Chamber of Deputies is a decision-making forum, and after the approval of the Commission, the law will go into the plenum, for one last vote.