Aiming to protect consumers from potentially excessive interest rates applied by Romanian non-bank financial institutions (NBFI) and to ensure increased transparency in loan claim assignments, in November 2024, Romania enacted Law 243/2024 on consumer protection regarding the total cost of credit and assignment of claims (Law 243/2024).
Long debated, this new piece of legislation has undergone significant changes since its draft was first published in February 2022, when it was intended to apply to all types of creditors, including credit institutions. It also faced criticism for alleged constitutional breaches but was found constitutional in August 2024.
Law 243/2024 became applicable on November 11, 2024, giving the market some time to adapt, especially regarding the limitations it imposed on credit costs and interest rates applied by NBFIs.
Interest and Credit Costs Limitation
For consumer mortgage loans granted by NBFIs for real estate investments, the effective annual interest rate (EAR) cannot exceed the interest rate on the lending facility applied by the National Bank of Romania (NBR) on the domestic finance/banking market by more than eight percentage points.
For consumer loans granted by NBFIs, the EAR cannot exceed the NBR’s interest rate on the lending facility by more than 27 percentage points. Exceptionally, in the case of lower-value consumer loans of up to RON 25,000 (approximately EUR 5,000), specific limits have been imposed on the total cost of credit, while the total amount payable by the consumer cannot exceed double the value of the principal.
Impact on Ongoing Loans Granted by NBFIs
The newly introduced limitations apply to ongoing loans granted by NBFIs, which are loans active on the enactment date of Law 243/2024 that have reached maturity and that have delays in payment of no more than 60 days. Consumer loans that are qualified as non-performing under Romanian legislation are excluded from the scope of this law.
Consumers may request a revision of their ongoing loan agreements if the cost limits are exceeded and may seek judicial intervention if necessary.
Once a request for adaptation has been received by an NBFI from a consumer, the creditor has 30 days to revert with a proposal to adjust the contract (by partial reduction and/or write-off of the debt, refinancing, etc.), taking into consideration the financial situation of and the maximum indebtedness level applicable to the debtor.
If the NBFI refuses or fails to respond within 45 days, the consumer may file a court action to obtain the adaptation of the loan agreement.
Impact on Loans Assigned to Third Parties
Loan claims assigned and/or otherwise outsourced by credit institutions to third parties may also be subject to requests for adaptation by consumers. This possibility may create uncertainties in secondary debt trading, where consumer-protection-related risks are particularly important.
Additionally, for claim assignments concluded on or after November 11, 2024, debt recovery entities acting as assignees may only collect from the debtor a total amount (including any expenses related to the recovery of the receivables) that does not exceed the claim certified by the creditor at the date the assignment agreement was concluded.
However, these limitations should not significantly impact the recovery potential of debt recovery entities, as they were already restricted in terms of the interest they can collect. In any case, collection up to the total face value of the receivable seems to be less frequent in the case of assignment of non-performing loans.
Practical Implications for NBFIs and Debt Recovery Entities
According to public information, some of the largest NBFIs in Romania are already implementing voluntary measures and adaptation programs for all ongoing loans, aiming at ensuring compliance with Law 243/2024. It is yet to be seen how these voluntary measures will be received by the impacted consumers and the National Consumer Protection Authority.
The new limitations introduced for debt recovery entities add up to existing restrictions applicable under the consumer protection legislation, with a view to further limiting the maximum amounts these entities may charge and/or collect from consumers.
In addition, the new transparency obligations requiring assignors to provide consumers with supporting documentation related to the assigned claim will likely add further burdens to the assignment notification process.
By Matei Florea, Partner, and Valeria Stropsa, Senior Attorney at Law, Schoenherr
This article was originally published in Issue 11.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
