ArmInfo. Commercial banks and credit organizations of Armenia will be limited in their rights to charge fines and pennies. Amendments to the Civil Code of Armenia were made at the sitting of the Armenian parliament on December 13 in the first reading.
According to the First Deputy Minister of Justice of the Republic of Armenia Artur Hovhannisyan, in the relations of commercial banks and credit organizations with their clients, a situation has begun whereby financial structures, using the liberal nature of the market, began to abuse their rights, often fixing fines and pennies in contracts with customers, which sometimes exceed by 10 times the principal amount of the loan.
According to the expert, numerous cases were recorded when a person who received a loan in a commercial bank for the amount of 300 thousand drams for the purpose of rendering medical assistance to his child, and being temporarily insolvent, eventually owed the bank not only the principal amount of the loan, but plus 3 million AMD in in the form of fines and pennies. "It is necessary to put an end to this practice," the deputy minister stressed. In particular, the draft law sets the maximum rate for fines, which can not exceed 4 times the maximum interest rate set by the Central Bank for banks, which by the current situation is 48%. At the same time, the accrued penalties and pennies on the customer's debt can not exceed the double size of the principal amount of the loan, regardless of the timing of the delay. Referring to the above example with a sick child, Hovhannisyan explained that according to the amendments, the bank or credit company will no longer have the right to demand from the borrower an amount exceeding 600 thousand drams.
Another change concerns the management of collateral. Currently, after the sale of the property on bail, the creditor will be obliged within a week to notify the borrower about the sale of the property and the repayment of part of the loan, and also to report the remaining amount. Otherwise, as today's practice shows, creditors do not notify borrowers about this, continuing to charge penalties and pennies on the amount of debt remaining after the sale of the collateral. Amendments to the Civil Code will oblige the creditor to notify the borrower on time, since otherwise no penalties and pennies can be applied to the latter. Moreover, banks and credit companies often wait for several months, and even a year before declaring for debt collection. To prevent this from happening, a maximum period of 3 months is set, after which banks will not have the right to charge fines and pennies.
Let's notice, that for last years on this question the suffered citizens repeatedly sent complaints to the financial ombudsman. But the current legislation did not allow to protect them from such usury.