The Constitutional Court of Romania declared unconstitutional certain legislative amendments in the consumer protection field
15 March 2019
On 13 March 2019, the Constitutional Court of Romania unanimously admitted the objections of unconstitutionality of the Law for supplementing the Government Ordinance no. 13/2011 on the legal default and penalty interest for pecuniary liabilities, as well as for the regulation of some financial-tax measures in the banking field, the Law for supplementing the Government Emergency Ordinance no. 50/2010 on consumer credit agreements, and the Law for amending and supplementing the Government Ordinance no. 51/1997 on leasing operations and leasing companies, as well as for supplementing Article 120 of the Government Emergency Ordinance no. 99/2006 on credit Institutions and capital adequacy.
The Court’s decisions substantiating its reasoning shall be drafted within maximum 30 days as of the pronunciation date and will be published in the Official Gazette of Romania.
Which rules were declared unconstitutional?
- in case of transfer of receivables arising from consumer credit agreements, the assignee cannot claim from the consumer more than double the assignment price paid in exchange of the assigned receivable;
- the leasing and loan agreements with consumers are no longer writ of execution;
- the penalties arising from loan agreements are capped to 50% of the amount representing the outstanding instalments on the termination date of the agreement;
- within the legal relationships between consumers and professionals, the penalty interest may produce itself interest only pursuant to a special agreement and only after exceeding the due date with more than one year;
- the effective annual interest (EAD) is capped as follows:
(i) a maximum of 3 percentages, in case of mortgage or immovable property loans (as defined by Law 190/1999 on mortgage credit for real estate investments);
(ii) 18% per year, in case of loans for consumption (i.e. any loan entered into by consumers that does not qualify as a mortgage or immovable property credit under Law 190/1999);
(iii) 50% in case of credits, loans or any other forms of consumer financing, whose value in LEI at the signing date does not exceed the equivalent of EUR 3,000.
What’s next? Effects of the Court’s decisions
- The Court’s decisions are final (i.e. cannot be challenged) and binding. The laws declared unconstitutional cannot enter into force.
- As the Court declared these laws unconstitutional in their entirety, to the extent the lawmaker would still insist in passing over similar norms, it will have to initiate and follow step-by-step a new legislative process and needs to observe the Court’s guidance.