The capping of interest on IFNs, promulgated by President Klaus Iohannis

The law on the capping of interest at non-banking financial institutions and the limitation of claims requested by debt collectors, a normative act that joins the law of giving in payment, citizens have a shield that protects them against any abuses of financial institutions, said yesterday, the social-democratic senator Daniel Zamfir, after the promulgation of the law by President Klaus Iohannis.

The initiator of the new normative act, Senator Daniel Zamfir, told us: "With this law, we practically closed a cycle of laws that protect people from abuses, starting from the law of giving in payment that limits interest for mortgage loans and reaching this law that limits consumer loans from IFNs and the amounts that debt collectors can claim from debtors. All those who have loans from non-banking financial institutions will no longer lose their homes. This is the fundamental thing because, as you well know, it has happened so many times that the interest rates of IFNs reach somewhere 4000, 5000, 7000 or even 60,000%. Therefore, through this law, we have established very clearly that no loan will be able to have an interest rate higher than double the amount borrowed, regardless of the period of the loan and the respective amount. The law also regulates the activity of debt collectors. Following the promulgation of the law, no debt collector can demand from the debtor more than the value of the debt, without any additional interest or commission. It is important for people to know that this law also applies to loans in progress at the time of its entry into force. If you are still under a loan contract with an IFN, at your request the IFN is obliged to recalculate your interest according to the new normative act".

The law was adopted by the Chamber of Deputies on March 26 as a decision-making body. Deputies belonging to the Save Romania Union Parliamentary Group and unaffiliated deputies contested this normative act at the Constitutional Court. On July 11, the CCR rejected, with unanimity of votes, as unfounded, the unconstitutionality objection formulated and found that the provisions of the consumer protection law regarding the total cost of lending and the assignment of receivables are constitutional in relation to the criticisms formulated.

The normative act aims at measures regarding the protection of consumers in their legal relations with non-banking financial institutions and entities that carry out the activity of debt recovery, establishing rules against excessive interest, it is stated in the statement of reasons.

The new law "applies to legal relations between consumers, non-banking financial institutions that grant loans according to Law no. 93/2009 on non-banking financial institutions and entities that carry out the activity of debt recovery, establishing rules for the protection of consumers against excessive interest in order to maintain the contractual balance and ensuring the integrity of the internal financial-banking market", according to the text of the normative act.

It also provides that the annual effective interest (APR) on mortgage loans for real estate investments cannot exceed by more than 8 percentage points the interest on the lending facility practiced by the BNR on the domestic financial-banking market. In the case of consumer loans, DAE cannot exceed by more than 27 percentage points the interest on the lending facility practiced by the BNR.

As an exception to these provisions, "in the case of consumer loans with a maximum value of 5,000 lei, the total cost of credit cannot exceed 1% per day and, at the same time, the total amount payable by the consumer cannot exceed twice the total value of the loan" .

Also, by way of exception, "in the case of consumer loans with a value between 5,001 lei and 10,000 lei, the total cost of lending cannot exceed 0.8% per day and, at the same time, the total amount payable by the consumer cannot exceed double the value total amount of credit".

Also by exception, "in the case of consumer loans with a value between 10,001 lei and 25,000 lei, the total cost of lending cannot exceed 0.6% per day and, at the same time, the total amount payable by the consumer cannot exceed double the total value credit".

In the event of exceeding the provided ceilings, the consumer can request the financial creditor to revise the contract, and the financial creditor is obliged to send in writing, within a maximum of 30 days from receiving the consumer's request, a proposal for revising the contract, taking into account the financial situation, including from the perspective of the maximum degree of indebtedness. In case of explicit refusal of the request for amicable revision of the contract or in case of a delay of more than 45 days in the response to such a request, the consumer will be able to ask the competent court for judicial adaptation of the contract.

From the date of submission the request for judicial adaptation of the contract, its effects on the consumer are suspended only if exceeding the stipulated ceilings is ascertained by a decision of the National Authority for Consumer Protection.

The normative act also established sanctions for the IFNs that violate the new legal provisions. Thus, it constitutes unfair commercial practice and is sanctioned according to Law no. 363/2007 the following facts:

- the stipulation and use of excessive interest or clauses regarding the total amount payable by the consumer that causes the maximum cost ceilings to be exceeded;

- the stipulation and use of penal interest that exceeds the total amount granted as a loan or credit;

- the stipulation and use of interest on sums containing interest or the bad faith concealment of interest and anathocisms under other denominations of costs or under stipulations intended to regulate other aspects of legal relations with consumers;

- the use of commissions, fees, premiums or other credit accessories, with the intention of hiding excessive interest.

In order to balance the benefits and reduce the risks generated by such contracts, this law "is also applicable to ongoing contracts, respectively active contracts on the date of entry into force of this law, which are mature and for which payment delays are at most 60 for days".

According to the normative act, it enters into force in 90 days from the date of publication in the Official Gazette.