Additional guarantee for the consumers – the Law of the credit for consumers

ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora

On April 1, 2011, the new law of credit for consumers came into force. The purpose of the law is to make stricter the allocation of the fast loans and credit for consumers, to ensure responsible borrowing and better information of the conditions of the credit agreement.

According to the Law, the creditor has to inform the debtor about the conditions of the agreement before the agreement is made. The advertisements by the creditors have also been restricted; the requirement to identify the size of forfeits and other possible expenses on the advertisement has to be pointed out.

The main point of this Law is the maximum size of the forfeits has to be pointed out. The Law of the credit for consumers determines that maximum size of the forfeiture is 0.05 percent from the unpaid amount; any additional economic sanctions can’t be applied for the debtor. Before the new Law came into force, the fast loan companies were able to apply to the Court and to claim from the debtor forfeitures that were not proportional. The size of forfeit was even 1 percent from the unpaid amount for each delayed day.

The only possible way to limit the claims of such companies were the decisions of the Supreme Court of Lithuania, that established that the proportional size of forfeits is 0.02 percent from the unpaid amount for each delayed day. Such forfeits, according to the Supreme Court, fully compensate the material damage of the creditor.

The Law of Credit for Consumers even determined that the debtor is able in two weeks after the signing of the credit agreement to suspend it and to return the loan without any fines. The adoption of the Law is a good turn in the fast loan business and is a constraint on the unconscionable creditor.