Termination of consumer credit contracts and the determination of the annual percentage rate become clearer

Amendments to the Law of Obligations Act will pass into law on the Labour Day. Those amendments elaborate on the terms of termination of consumer credit contracts and the calculation of the annual percentage rate.

According to applicable law the lender is able to cancel a consumer credit contract if the recipient of the loan is in delay of payment with three instalments. Generally the principal and the interests must be paid on a monthly basis. There have been numerous disputes whether the interests are a part of an instalment and if one can cancel the contract when the interests are not paid. In compliance of the aforementioned amendments the term “instalment” is replaced with “repayment” and failure to pay interests can lead to the cancellation of the contract.

The calculation of the percentage rate is also concretized. The amendments primarily concern credit cards with predetermined repayments and those with fixed payments. Standardized regulations allow the calculation of the percentage rate on uniform basis and similarly across the European Union. It will also be possible to objectively compare the costs linked to credit products. For example, a consumer credit contract, which is entered into for an unspecified term, it must be assumed that the credit will be repaid in 12 equal repayments within a period of one year.