This week, the government should determine the draft law on consumer loans, which will abolish fees for processing and early repayment of housing loans, and the highest allowed effective interest rate on consumer loans will be introduced.
Consumer loans include - housing loans, non-purpose cash loans, cash loans for pensioners, mortgage loans, loans for reconstruction and adaptation, loans for refinancing, loans for the purchase of a motor vehicle and loans for education.
In addition, novelties are being introduced in the part of assessing the creditworthiness of consumers, so that creditors are now obliged to establish procedures for early identification of consumers who may have difficulties in paying, and to establish contacts with them in order to find the best solutions for continued loan repayment. It is also a novelty that before starting enforcement proceedings, creditors must try to reach an agreement with consumers on the collection of obligations, which includes the obligation for the creditor to propose measures to facilitate the repayment of the contract in such circumstances.
Good European practice
With home loans, it is stipulated that after the conclusion of the loan agreement, the creditor cannot unilaterally introduce new fees, nor can they increase the fees that existed at the time of the conclusion of the loan agreement.
"Vijesti" has insight into this bill and the RIA study (analysis of the assessment of the impact of regulations).
"The European Commission, in July 2024, gave a positive opinion on the Proposal for the Law on Consumer Credit in its entirety, thus confirming the initiative of the Central Bank towards the Ministry of Economic Development, as the proposer of the law, as a good European practice", it was said yesterday officially from CBCG.
Secretary General of the Association of Banks (UBCG) Bratislav Pejaković announced two days ago that they learned from the media about this bill, which they had no insight into, and that no one disputes the application of EU directives, however, they are taken over from significantly more legally and economically regulated systems, so they need a transition period and adequate preparation at the system level, with the elimination or significant reduction of business risks.
In the RIA study, however, it is written that UBCG participated in the public debate and that some of their suggestions were accepted.
The CBCG emphasized that the representative of the Directorate for Supervision in the Area of Prevention of Money Laundering and Financing of Terrorism and Protection of the Rights of Clients of Credit Institutions and Users of Financial Services was a member of the interdepartmental working group that prepared the Draft Law on Consumer Credits, which implemented directives 2008/48 and 2014/17/EU and adopted best practices of EU member states.
"The Ministry of Economic Development, as the proposer of the law, organized a public debate on the draft of this law in December 2021, during which all interested entities had the opportunity to give their remarks, proposals and suggestions. In February 2024, the CBCG produced an analysis of interest rate trends on the Montenegrin market, which showed a tendency for interest rates on loans, including consumer loans, to rise. Bearing in mind the challenges faced by consumers as the weaker contracting party when concluding credit agreements with creditors, and taking into account their adequate protection, the CBCG initiated the determination of the highest allowed effective interest rate on consumer loans in the new law on consumer loans, in in accordance with the best practices of EU member states", said the supreme monetary institution.
Kamata
It was further clarified that after a detailed review of the comparative solutions applied in EU member states, and taking into account the characteristics of the Montenegrin financial market, the CBCG proposed that the highest effective interest rate on consumer loans must not be higher than the average weighted effective interest rate of all consumer loans , increased by 100%.
"That legal solution is based, therefore, on the market principle, and it does not administratively limit interest rates, but, in this way, affects only extremely high interest rates and ensures a higher level of consumer protection," emphasized the CBCG.
The average weighted effective interest rate on the balance of all consumer loans entered in the credit register is determined by the CBCG at the end of each quarter and published on its website.
The draft law defines that all information, including advertising materials in connection with the loan agreement established by this law, must be given in a fair and clear manner and must not mislead the consumer, and any expression that could to create false expectations about the availability or cost of credit. Also, the obligation to provide information is extended to credit intermediaries, which additionally ensures that consumers are adequately informed about all aspects of the loans they take.
Consumer loans include - housing loans, cash non-purpose loans, cash loans for pensioners, mortgage loans, loans for reconstruction and adaptation, loans for refinancing, loans for the purchase of a motor vehicle and loans for education
The draft law regulates in detail the conditions for the work of credit intermediaries and the responsibilities of creditors for their work.
Deputy Prime Minister and Minister of Economic Development Nick Djelosaj announced officially on Monday that the draft law will be in the Government session this week.
"With the adoption of this law, consumers in Montenegro receive significantly greater protection than was the case until now, and the legal framework for this area is aligned with EU standards, which ensures fairer conditions and greater security for consumers when taking out loans," he announced. , among others, Đeljošaj.
Banks do not charge a fee for early loan repayment
Pejaković stated that there are already procedures in banks that are stated for proposals through the media, for example the know-your-client procedure, as well as a procedure for early identification of consumers who might have difficulties in paying, but also for clients in general, not only for citizens.
"What is the purpose of existing restructurings, calls from the bank, debt repackaging, consolidation, transition from a contract with a variable to a fixed interest rate in the period of growth of the variable rate even though the bank is not obligated to do so by contract, in crisis and moratorium, etc. but to increase the client's capacity to return the money he received from the bank. Transparency, so you have a pre-contract, and then a contract that every client should read, where all information from rights to obligations and the effective interest rate prescribed by the CBCG are given. Additional information, banks have not charged a fee for early loan repayment for a long time. If we had insight into the draft Law on Consumer Credits, we would be happy to point to EU practice and comparative practice in our system," said Pejaković.
He added that administration outside of market rules can be counterproductive, for which we have experience from the region.
The Association of Banks participated in the public debate
In the RIA study, which "Vijesti" has access to, it is written that the Association of Banks of Montenegro expressed interest in the public hearing and made a significant number of suggestions and proposals that are contained in the Report on the conducted public hearing no. 012-328/21-1054416 from April 5, 2022.
"All the suggestions of the Central Bank of Montenegro, as well as the proposals of the Association of Banks regarding the creditor's obligation to keep a copy of the concluded loan agreement within 10 years from the date of repayment, the deletion of the LIBOR index, and the expansion of the total loan costs to the notary's costs, have been accepted," he writes. in the RIA study.
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