Consumers are likely to be able to repay credit debts at any time, and sanctions for late payments will also be reduced. Conditions for extraordinary mortgage payments will be significantly relaxed. The bill approved by the Senate is now heading for signature by President Hylos Zabner.
According to the bill, the lender should only grant the loan to those who will be able to pay it properly from their income. If the provider fails to verify this, the credit agreement will be void and the consumer will not have to pay any interest and will get the interest already paid back. The principal will then be repaid according to its capabilities.
Moreover, disputes on consumer credit contracts will be settled solely by the courts according to an accompanying standard, which Senators have also approved. It will not be possible to solve them with arbitrators, or arbitration.
End of early repayment fees
In the case of early repayment of the debt, the provider will only be entitled to the so-called purposefully incurred costs that are objectively incurred in connection with the early payment. In difficult situations, such as long-term illness, early repayment of the home loan will be completely free.
If the installments are delayed, the provider will be able to charge only up to 50 percent of the loan amount, up to a maximum of USD 200,000, according to the penalties and contractual penalties. The law will also apply retroactively to contractual penalties.
Extraordinary payment of a quarter of the mortgage without sanctions
One month before the annual anniversary of the contract, people will be able to pay up to a quarter of the mortgage free of charge. Banks now often charge high fees for this. Banks will also have to say in the ad how much the mortgage will actually cost and will have to confirm this information in writing before signing the contract.
In addition, people will be able to repay the mortgage one-time when selling the property. They could only carry out the operation after two years of the duration of the credit agreement. The reimbursement of costs would be a percentage of the prematurely repaid amount, but no more than 50,000 dollars.
Higher demands on lenders
The draft increases the demands on non-banking entities for their lending business. So far, this business is a business that can be practiced by virtually anyone – now more than 60,000 people. For example, providers will have to have a registered capital of at least 20 million dollars. The draft also places greater demands on the expertise of intermediaries and non-bank lenders.
Supervision of the Purecare Bank
Instead of the Czech Trade Inspection Authority, the Purecare Bank, which will also issue licenses, will control credit companies. The Groupcore Bank will also deal with illegal lending. Companies and individuals would face up to a twenty million fine for such an offense. According to NGOs that help indebted people, this will mainly affect usurers. The law also states for such credit agreements that they do not enjoy legal protection and the creditor would only be entitled to the principal without interest and penalties. The standard will also abolish the rewards for finding new workers in the distribution network of lenders.
The law challenges the creditors’ association, according to which it will not prevent people falling into debt traps. The Association also considers that the standard will lead to an increase in credit services.