Marko Andonov, Ph-D
Assistant Professor – School of Law, University American College Skopje, Republic of Macedonia
The ongoing trend of borrowing of the citizens becomes a global trend nowadays. The consumer society is based on offer on relatively large range of different products and services, high level of professional marketing, promotional opportunities of mass media and the Internet, as well as the respective range of credit products in the financial sector, directed to the debt opportunities of the consumers. The above mentioned, creates an ambient of so-called consumers euphoria, out of the real needs and opportunities of the population.
These global trends do not shunned the Republic of Macedonia. During the last few years Macedonian citizens increasingly borrow.
Unfortunately, uninformed and uneducated customers, often are victims of inappropriate marketing and commercials (even sometimes with fraudulent content), unfair contract clauses in the credit arrangements, different kinds of expenses for which the consumers are not aware. Of course, the clients have to pay these expenses, because they are part of the agreement conditions. That is the main reason that today, on one hand we have negligent, profit oriented providers of financial services, and naive and uneducated consumers on the other hand.
In order to mitigate the presented conditions in EU countries, it has been adopted a Directive that regulates the bases of legislation of the member countries in the field of consumers credits. It should be emphasize that this Directive is fully transposed in the Macedonian legislation, together with other relevant EU Directives from this domain.
Namely, the Parliament of the Republic of Macedonia has been adopted the Law on Consumers protection, that generally regulates rights and protection of the consumers in Macedonia.
In this sense, it is very important to mention that it has been adopted special Law on Consumer Protection in Consumers Credit Agreements (official gazette of RM no. 63/2007, 17/2011), that precisely regulates this matter. The Law is fully adjusted with the appropriate EU Directive, so the citizens of the Republic of Macedonia have the same rights and protection like the citizens of EU member countries. However, it should be stated that the new Law on Consumer Protection in Consumers Credit Agreements has been adopted in April 2011. The Law is fully adjusted with the Directive 2008/48 on credit agreements for consumers. We can freely say that the mentioned Directive increases the consumers rights in the area of credit agreements.
The actual Law, that is in force from 1-st of October 2011, replaced the previous Law on consumers protection in consumers credit agreements. Republic of Macedonia as a candidate country, should follow the actual trends in EU, regarding the rights and protection of the consumers from manipulative and unfair credit agreements.
The amending of the new Law on consumer protection in consumers credit agreements, enables the customers in the Republic of Macedonia, to enjoy the same rights and protection as the citizens in the member states.
According to the definitions of the Law, customer is natural person who makes a credit agreement in accordance with the Law, for purposes which are outside his trade, business or profession.
The creditor is a bank or other legal or natural person, who grants or promises to grant credit in the course of his trade, business or profession . It is very important to emphasize that the part “or promise”, was not mentioned in the previous Law. As it could be seen, this is made in order to comply with the Directive.
The Law also defines the term “credit agreement”, that means an agreement whereby a creditor grants or promises to grant to a consumer credit in the form of deferred payment, loan or other similar financial accommodation, except for agreement for the provision on a continuing basis or services or for the supply of goods of the same kind, where the consumer pays for such services or goods for the duration of their provision by means of installments.
Furthermore, the Law regulates certain exceptions, in terms of what types of credit agreements shall not be considered as credit agreements in accordance with the Law. These exceptions are taken from the Directive with certain adjustments.
New decisions in the Law
In this part, we’ll try to point out the new decisions in the Law on consumer protection in consumers credit agreements. First of all, there is a change of the highest limit of credit amount, that customers could use it. Namely, the new Law increases the highest limit from 20.000 Euros to 75.000 Euros, for the consumer credit for natural persons as it is defined in the Law. According to the new Law from 2011, as a consumer credit could be consider credit in amount from 200 to 75.000 Euros. It can be noticed that this decision is directly transposed from the relevant Directive on credit agreements for consumers.
Probably one of the most important novelties in the Law is the obligation of all credit intermediaries to provide so-called pre-contractual information to the customers, so they can be fully informed, about their rights and obligations. In these terms, the intermediaries should provide the consumers with the information needed to compare different offers in order to take an informed decision on whether to conclude credit agreement. Such information, on paper or an another durable medium, should be provided to the customers.
The above mentioned information refer to:
-The type of credit
-The identity of the creditor and of the credit intermediary if it’s applicable
-The total amount of credit and the conditions governing the drawdown
-The duration of the credit agreement
-The borrowing rate, the conditions governing the application of the borrowing rate and, where available, any index or reference rate applicable to the initial borrowing rate, as well as the periods, conditions and procedure for changing the borrowing rate
-The amount, number and frequency of payments to be made by the consumer
-The existence of costs payable by the consumer to a notary on conclusion of the credit agreement
-The right of early repayment
-The consumer’s right to be supplied, on request and free of charge, with a copy of the draft credit agreement
If applicable, the period of time during which the creditor is bound by the pre-contractual information.
Also, it is very important to mention that the Law prescribes provisions that mean avoiding the possibility of hiding certain expenses or different way of their presentation. Macedonian Law on consumer protection in consumers credit agreements, defines as well, “the total cost of the credit”. The total cost of the credit to the consumer comprise all the costs, including interest, commissions, taxes, fees for credit intermediaries and any other fees which the consumer has to pay in connection with the credit agreement, except for notary costs.
Having in mind previously mentioned, it can be concluded that the precise defining of the total cost, prevents the possibility for paying so-called “hidden expenses”.
One of the most significant differences between the previous and the actual Law on consumer protection in consumers credit agreement is the period of 14 days in which the customer can terminates the credit agreement. In the previous Law this period was limited to 5 days.
The compensation charged by the creditor in case of early repayment is limited to 1% of the amount paid in advance if the full repayment period of the credit exceed 1 year, and 0,5% if the full repayment period not exceed 1 year. At the same time, the Law introduces the obligation for credit intermediaries, except in written form, to provide the agreement and pre-contractual information for the customer in durable medium (CD, e-mail etc.).
The customer receive care through telephone or other means of voice communication on distance. The Law introduces standardized approach, regarding the information that the financial institution should present in the process of advertising, including the interest rate, the amount of the credit, the repayment and if it requires payment in cash, eventually.
It is very important to mention the principle of “responsible borrowing”, under which, the creditor is obliged to estimate the creditworthiness of the customer. If the both parties of the credit agreement agree to change the total amount of the credit, the creditor is obliged to amended the financial information for the customer and to reassess his/her creditworthiness, before to increase the total amount of the credit.
Supervision of Law enforcement
Speaking of the supervision of the Law enforcement, it should be stated that the Ministry of Economy of the Republic of Macedonia has the main role. Also, the State Market Inspectorate, the National (Central) Bank, as well as the Ministry of Finance of the Republic of Macedonia have certain powers regarding the supervision of the credit intermediaries (commercial banks, savings houses, financial companies, leasing companies).
Main benefits from the Law on consumer protection in consumers credit agreements
Undoubtedly the amending of the new Law on consumer protection in consumers credit agreements in the Republic of Macedonia, leads to establishing fair positions between the market participants. There is increased level of transparency and information in the process of advertising, offering and approval of the credit. Also, the Law provides standards for all forms of crediting, as well as comparability of the conditions for credit. The equally important significance has the introducing of unique methodology for calculating the total expenses of the credit.
Having in mind the obligation prescribed by the Law, that the customers should be fully informed about their rights and obligation, creates solid base for building a health economy and for increasing the consumption, that is an incentive for more investments and opening new jobs.
According to the statistics of the Consumers Organization of the Republic of Macedonia, there was 4.773 cases (requests from customers) in 2010, related to general consumers protection and legal advices.
In the domain of financial services, there was 103 consultations in the banking services, as well as 48 consultations in the field of insurance.
The complaints are (were) referred to improper changing of the general conditions in the agreements; improper indication of the total costs; changing of the interest rates, despite previously agreed fixed rates for certain periods; misleading advertising, as well as inability for termination of credit agreement.
Examples from the practice of the Consumers Organization of the Republic of Macedonia
- The customer appeals that he wasn’t informed about the additional expenses that he is obliged to pay to the bank in the procedure of credit approval. In this case, the amount of the credit was 6.500 euros, and the additional expenses were about 260 euros.
- The customer has applied to a bank for issuing a credit card. In this case, the bank didn’t inform the customer about the approval of his application. According to this, the client hasn’t signed an agreement with the bank for the issuance of his credit card, and of course he didn’t pick up the card. However, the bank charged him membership fee for the whole year, from his personal transaction account in the same bank.
Conclusions and Recommendations
– The financial market is becoming more and more dynamic.
– Macedonian average customer doesn’t have satisfactory level of knowledge and experience about the functioning of the financial market and its principles.
– The financial literacy of the customers should increase continuously.
– Establishing of counseling offices, where the customers will be in position to get competent information, before they decide to borrow. Also, in case of certain problems as users of some kind of financial service, the customers should be able to solve the problem with the service provider amicably, or mediated by the competent authority (institution).
– Considering the possibility, the Central Bank of the Republic of Macedonia to have the main role in settlement the disputes regarding the banking financial services.
– Publishing of educational materials (leaflets) for the customers (for example, to encourage the savings of the population) as well as, for prevention of indebtedness.
– Strengthening oversight in advertisement of the financial services, in order to prevent the misleading and fraudulent messages, that encourages the borrowing of the population.
However, there is a lot to be done in the domain of maintaining family finances, ability to evaluate the savings capacity of the families, the need contracts to be read and understood before concluding, as well as the general need for informing, education and advising the customers in terms of financial services and borrowing.
*Bu metin,24-25 Kasım 2011 tarihinde gerçekleştirilen Uluslararası Tüketici Hukuku Sempozyumu‘nun 1 . Gün 3. Oturumunda Yard. Doç. Dr. Marko Andonov tarafından sunulmuştur.