Act on consumer loans

Act no. 257/2016 Coll.
With effect from: 1 December 2016

The new Act provides for a much more stricter rules for consumer loans providers. Newly it is necessary to be granted with an approval by the Czech National Bank (for existing providers there is a temporary period specified on 18 months since this Act becomes effective, however these providers have to file the application to the Czech National Bank until the end of February 2017) and have an equity of at least 20 million CZK.

The provider has newly an obligation to verify that the loan applicant will be able to pay the loan from his or her income duly. If the provider does not verify this condition duly and before the conclusion of the loan agreement, such agreement would be void.

The law further provides for a requirement of a written form of the loan agreement. The agreement has to meet a number of other requirements. These, among others, include specific information on type and conditions of the loan. In case of breach of these requirements, the agreement would not be void, however the interest rate would be changed automatically to the repo rate of the Czech National Bank.

The law further prohibits the possibility of incorporating of the arbitration clauses into the loan agreements. The Act’s provisions also apply to the microloans up to CZK 5 000.

The possibility to pay off the loan prematurely can be considered as an important change. The creditor has generally a right to claim the costs effectively made in connection with the premature pay off. However, the creditor does not have such right in certain cases specified by the Act (e.g. in case of housing loan if 25% of the loan should be paid off within 1 month before the day of anniversary of the conclusion of the loan agreement) (open the official wording).