Amendment to Consumer Lending Act from April 21, 2010

http://www.sbirka.cz/POSL4TYD/NOVE/10-145.htm

The purpose of this act is to transpose the April 2008 ruling of the European Parliament and Council regarding consumer lending contracts and additionally, according to the explanatory report, the strengthening of trust and legal confidence of not only the consumers, but also the providers of loans to consumers.

The new act should also accommodate the current supply of products on the market.

Major issues addressed by the act:

     (i)       The new act determines the information listing which the provider is obliged to provide to the creditor with sufficient time in advance of the closing of the contract, in the contract itself and also during the execution of the contract. The act provides for a deemed fulfilment of the obligation to inform in case of providing the information on form attached to the act as its annex.

The duty to provide this information is stipulated in §§ 4 and subsequent sections. The full information and form listings are provided in the attachments 1 – 7 of the law.

The law contains an information listing that the creditor is obliged to provide the consumer with when advertising an offer, before closing a contract, in the contract and during its execution.

This includes, amongst others:

• Information about the creditor, eventually the consumer
• Information about the loan (duration, amount, type, conditions of withdrawal…)
• Information regarding payments (amount, number, occurrence), procedure in case of delayed payments, eventually consumer delay
• Request for adequate security or insurance
• Annual percentage rate of expenses and further loan expenses and related payments
• Conditions of withdrawal and of premature repayment
• Information on resolution of disputes (e.g. financial arbiter)

   (ii)       The implementation of the right of the consumer to withdraw from the contract without giving a reason and without a sanction up to 14 days after the contract’s closing.

   (iii)       A new concept of the so-called tied consumer loan, i.e. a consumer loan whose provision is tied to the purchase of a good or service by the consumer. When the consumer withdraws from the contract of the purchase of the good or service, the withdrawal automatically ends the consumer loan contract.

   (iv)       Two entities are overseeing that all duties are fulfilled: the Czech Commercial Inspection and the Czech National Bank.

This act comes into force on 1 January 2011.