The Law adopted by the Parliament on 4 April, regarding the suspension of payment of credit instalment (the Law”) overlaps with the EOG no. 37/2020 regarding granting certain facilities for credits (the “EGO”), while in the same time presenting a number of essential differences.

">
COVID-19
RO EN

Comparative analysis of the provisions of the Law and the Government Emergency Ordinance regarding the suspension of payment of credit installments

The Law adopted by the Parliament on 4 April, regarding the suspension of payment of credit instalment (the “Law”) overlaps with the EOG no. 37/2020 regarding granting certain facilities for credits (the “EGO”), whdile in the same time presenting a number of essential differences.

The Law has been sent for promulgation to the Romanian President, however there are already news that it will be contested in from of the Constitutional Court, and even at the date of this article it seems to have been disputed already.

On its merits, following a comparative analysis between the Law and the EGO, we notice the following main differences with respect to the subject of suspension of payment of credit instalments:

  • First of all, the suspension of the payment obligation of credit instalments (principal, interest and fees) operates at the request, up to 9 months, but no later than 31 December 2020, by means of extending the maturity of the credit, without any additional costs. Namely, the interest and fees related to the postponed instalments, will not be capitalized in the principal of the existing credit facility, irrespective of the debtor or type of credit (mortgage loans or other types).
  • With respect to eligible persons, the Law enumerates them and includes “legal entities in credit and leasing agreements, excepting credit institutions”, as well as expressly mentioning SMEs, alongside associations and foundations (NGOs).
  • In our understanding, this means the Law will apply to all debtors legal entities, including large corporate.
  • The new facility will apply to debtors that do not register payment delays, representing principal and/or interest over 90 days, and also the Law, unlike the GEO and its rules of application, does not condition this facility to suspend the installments of the advance payment of the arrears until the date of the application for the suspension. On the other hand, the Law expressly excludes debtors that are under enforcement procedure, giving in payment (datio in solutum) procedure or judicial reorganisation. In our opinion, these type of debtors could not have benefited from the suspension of interest payments, to the extent that the loans had already been declared due and payable.
  • Furthermore, the debtora are not subject to a dead-line for exercising their right to request the suspension of payment of instalments (while in the case of the EGO the request must be made until 14 May 2020).
  • Debtors, other than natural persons, can request the suspension of payment by means of a statement referring to the fact that their income or revenues have diminuished by a minimum of 15% in the current month versus the average of the past two months, not to mention the necessity of obtaining an emergency certificate attesting either the decrease of the incomes or the receipts or the total or partial cessation of the debtor's activity.
  • The law does not regulate state guarantees for the credit instalments suspended from payment.

Furthermore, the Law regulates a general moratorium with respect tot any enforcement procedures, including enforcement of movable or immovable assets or garnishments of any kind, started before the date of entry into force of the Law, which will be suspended up to 31 December 2020.

The drafting technique used in the document is subject to criticism, considering that the moratorium is regulated within the same article as the provisions regarding suspension of payment obligations. However, the legal text does not corelate the enforcement procedures subject to the moratorium with the credits being subject to suspension of payments. On the contrary, the current drafting provides that the moratorium refers to any such procedures underway at the time when the Law enters into force.

The Law shall apply not only to credit institutions and non-banking financial institutions, but also to registered entities who undertake collection of receivables activities.

It remains to be seen if the project Law adopted by the Parliament will be promulgated into law, since the project suffers from many procedural deficiencies, amongst others the absence of an opinion from the National Bank, which is mandatory in the case of law projects with an impact on the domains supervised by the NBR.

Also, although the Law has been adopted by Parliament after the entry into force of the EGO, it does not contain any provisions with respect to the total or partial repeal of the competing legislative norm. We also mention that even in case of an implicit repeal, as a result of the fact that technical legislative norms do not allow for the existence of two pieces of legislative on the same subject, the EGO and the Law do not perfectly overlap. For example, there will be a discussion regarding the extent to which the state guarantees granted to secure the interest related to mortgage loans granted to natural persons, as regulated under the EGO will continue to apply.

 

The present article is for informational purposes only and does not represent a legal opinion. Therefore, we do not recommend making decisions based on this text without a prior analysis based on the facts and circumstances of each case.