On 13 August 2024, Law no. 243/2024 on Consumer Protection regarding the Total Cost of Credit and the Assignment of Claims (“Law no. 243/2024“) was published in Part I of the Official Gazette of Romania no. 807 and it is set to come into force on 11 November 2024.
Before the publication of Law no. 243/2024 in the Official Gazette, it was the subject of a constitutional challenge, which was rejected by the Constitutional Court of Romania through Decision no. 379/2024.
The legal relationships regulated by Law no. 243/2024 are (i) those between debtors who are consumers and creditors that are non-banking financial institutions (“NBFIs”) and (ii) those between debtor-consumers and NBFIs and entities engaged in debt recovery activities.
Law no. 243/2024 includes the following essential provisions:
• defining fundamental concepts with which the law operates (e.g., the consumer, the assignee of claims, the credit contract, the mortgage loan for real estate investments, the consumer credit, the excessive interest);
• presuming the debtor to be a consumer acting for personal or family purposes, as well as analyzing this status in relation to the contract that falls under the scope of Law no. 243/2024, rather than the entire activity of the specific debtor;
• analyzing the concept of the Annual Percentage Rate (“APR“) as the total cost of the credit for the consumer, expressed as an annual percentage of the total credit amount, and setting specific caps for the APR as follows:
– for mortgage loans for real estate investments: the APR cannot exceed by more than 8 percentage points the credit facility interest rate practiced by the National Bank of Romania (“NBR“) on the domestic financial-banking market;
– for consumer loans: the APR cannot exceed by more than 27 percentage points the credit facility interest rate practiced by the NBR.
• defining the Total Credit Amount (“TCA“) as the ceiling or total amounts made available based on a credit contract, and defining the Total Amount Payable by the Consumer (“TAPC“) as the sum of the TCA and the TCC (as defined below);
• defining the Total Cost of Credit (“TCC“) as all costs (including interest, penalty interest, commissions, fees and any other types of costs) that the debtor must bear in connection with the credit contract and which are known by the creditor, with the exception of notarial fees (the costs for ancillary services related to the credit contract, particularly insurance premiums, are included in the TCC if the conclusion of the service contract is mandatory for obtaining the credit itself or for obtaining it in accordance with the terms and conditions presented), and setting specific caps for the TCC as follows:
– for consumer loans up to RON 5,000: the TCC cannot exceed 1% per day (simultaneously, the TAPC cannot exceed twice the total credit amount);
– for consumer loans between RON 5,001 and RON 10,000: the TCC cannot exceed 0.8% per day (simultaneously, the TAPC cannot exceed twice the total credit amount);
– for consumer loans between RON 10,001 and RON 25,000: the TCC cannot exceed 0.6% per day (simultaneously, the TAPC cannot exceed twice the total credit amount).
• the possibility of reducing the APR, the TCC, and / or the TAPC in situations where they exceed the above-mentioned caps, at the consumer’s request, either amicably, judicially, or by appealing to an alternative dispute resolution entity. The consumer’s request can be made either directly by them or through a consumer association;
• the possibility of revising the credit contract in the event of exceeding the above-mentioned caps, at the consumer’s request, depending on the consumer’s financial situation and taking into account the maximum level of indebtedness. The revision of the contract may include measures such as (i) reducing or partially waiving some of the consumer’s obligations, (ii) rescheduling or refinancing them, or, if applicable, (iii) handing over the mortgaged property in lieu of payment;
• establishing the unfair commercial practices nature of the following creditor behaviors:
– including clauses in credit contracts that lead to exceeding the maximum limits set by Law no. 243/2024 (as mentioned above);
– stipulating and using penalty interest rates that exceed the total amount granted as a loan or credit;
– stipulating and applying interest on amounts that already include interest or maliciously hiding interest and compound interest (i.e., “interest on interest”) under other cost names or provisions meant to regulate other aspects of the legal relationships with consumers;
– using commissions, fees, premiums, or other credit accessories with the intent to hide excessive interest rates.
• applying Law no. 243/2024 to ongoing contracts (i.e., in the terminology of the law, to contracts active at the date of its entry into force, that are mature and where payment delays are no more than 60 days), with certain specific adaptations;
• establishing a prohibition on entities engaged in debt recovery activities from charging the debtor-consumer a total amount that exceeds the value of the debt, as certified by the creditor at the time of concluding the claim assignment contract (including any costs related to debt recovery, such as costs of enforcement).
