Legal experts in the Chamber of Deputies have done their job on the giving in payment

EMILIA OLESCU (translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 6 aprilie 2016

Legal experts in the Chamber of Deputies have done their job on the giving in payment

Next week comes the vote in the plenum

Zamfir: "We have reached a compromise with the PSD, which resolves most issues"

More than three months after it was sent back to the Parliament, the Law of giving in payment passed the Juridical Commission of the Chamber of Deputies.

Meanwhile, the legislative text has undergone a series of amendments and each side has clung to some of their proposals until the last minute, while abandoning others.

Deputies have voted the law which stipulates the extinguishment of the debt through the assignment in favor of the bank of the property used as collateral in the borrowing agreement, with the following amendments: the cap on the amount borrowed at the time the loan was taken out has been set at 250,000 Euros, up from the initial value of 150,000 Euros; loans taken out through the First Home program have been removed from the law, which will no longer apply to them; the new regulations will also apply to debtors that have already been foreclosed on; all mortgage loans taken out for the building of homes, regardless of whether they have been guaranteed with a plot of land or not, will see the law apply to them as well.

Consumers and initiators of the law have been pleased with the version of the law that has been passed by the specialized commission.

Liberal deputy Daniel Cătălin Zamfir, the initiator of the law made the following statement at the end of the Parliament's session: "I still think that the 250,000 Euros cap raises issues of discrimination. But the wise course of action was to release the law. People who have borrowed less than 250,000 Euros represent the majority. If the Constitutional Court deems this restriction unconstitutional if the unconstitutionality exception is invoked, that this cap is unconstitutional, then that article will be removed from the law and the rest of those debtors will benefit from this law as well.

I do not think we have to notify the Romanian Constitutional Court at the present time. After all, we have reached a compromise with the PSD which resolves most issues".

In response to a question, lawyer Gheorghe Piperea, who drew up the text of the legislative draft, reiterated the fact that the loans outsourced abroad come under the effect of the Law of giving in payment, and said: "The entities which banks assign non-performing loans to are required to have a representative in Romania, for consumers to talk to. Usually, that proxy is the bank, and the consumer will notify the bank about the law of giving in payment".

Concerning the amendment according to which people who have already been foreclosed upon will see the law apply to them as well, NBR deputy governor Bogdan Olteanu warned that the introduction of a new category of beneficiaries in the legislative draft exceeds the scope of President Iohannis' request for reexamination.

He pointed out: "The president, in the request for reexamination, has asked for the narrowing, not the expansion of the categories that the law applies to. (...) This amendment has introduced a risk of unconstitutionality".

Bogdan Olteanu said that the NBR agrees to the provision that the Tax Administration should not be capable to pursue the debtor (ed. note: which is what would happen in the case of First Home loans, in the event of a debtor's foreclosure), even if that were to involve exceptions from the application of the Fiscal Code.

In the opinion of Adrian Vasilescu, a strategy consultant with the NBR, the elimination of the First Home Program from the law is a success, but even in this form, the legislative initiative does not resolve the imbalances between the banks and their customers.

Mr. Vasilescu told us: "The number of people who have borrowed money in the form of mortgages is outrageously low. (...) We have a shortage of 1 million homes. Under these circumstances, from my point of view, the law does not resolve the imbalances in the banking system and the ones between banks and consumers. It takes the intervention of the state and of the budget. The state, with its budget, must open the umbrella when it rains, meaning when banks close it".

Adrian Vasilescu also thinks that the Law of giving in payment has "failed the civil law test", and he thinks that the jurist deputies should clarify the legal issues before sending their approval to the plenum of the Parliament.

Deputies have also voted in favor of the law not applying to consumers convicted through a definitive ruling of offenses related to the loan which they are requesting the giving in payment for.

The last step until the law ends up on the table of president Klaus Iohannis is the vote in the plenum of the Chamber of Deputies - which is the decision making forum. Deputies have also said that the law will arrive in the plenum next Wednesday, because the report drawn up by the Legal Commission must be reviewed for at least five working days until the final vote.

Romanian Banking Association has ordered a poll concerning the Law of giving in payment

More than three quarters of Romanians (77%) think that the law of giving in payment should only apply to people who can't make their payments, not those who can afford to pay but they don't want to anymore, according to the poll "Romanians' opinions on the Law of giving in payment" conducted by IRSOP Market Research & Consulting, quoted by The Romanian Banking Association (ARB). The RBA press release states: "Most respondents were opposed to the law applying to those who have bought several homes/plots of land and are in trouble, and indicated that only those with one home should be beneficiaries of the law (81%). Besides, 89% of Romanians feel that it is better for a law to exist that would help individuals who have taken out a loan and are in financial distress".

The banking community in Romania reiterates that there is a need for the deadline for the coming into effect of the Law no. 151/2015 concerning the insolvency of individuals. In the banks' opinion, the major advantage which the Law concerning the insolvency of individuals has over the law of giving in payment is that after the insolvency, the individual debtor acting in good faith may retain the ownership of the property used as collateral, whereas the giving in payment means losing the home/plot of land.

"Approximately 94% of Romanians vote for negotiating of a solution through a voluntary agreement with the bank and the keeping of the home, when they are faced with financial difficulties, while only 6% of Romanians want a law that would stipulate the termination of contracts signed with banks and the abandoning of the property (the Law of giving in payment)", the RBA further states, mentioning the aforementioned poll.

The study was conducted nationwide, on a sample of 1,016 respondents. The poll was conducted for the Romanian Banking Association between March 28th - April 1st 2016, and the error margin is +/- 3%.

Gheţea: "I hope that the president will notify the Romanian Constitutional Court, if dangerous threats remain in the law"

Radu Graţian Gheţea, the president of CEC Bank and honorary president of the Romanian Banking Association (ARB), yesterday expressed his hope that president Klaus Iohannis will send to the Romanian Constitutional Court the law of giving in payment, if this is approved in the Parliament in a version that is harmful to the banking sector.

"I have the hope that new amendments will be made. I have the hope that if serious provisions remain included in the law, the president will notify the Constitutional Court", said Gheţea, quoted by Agerpres.

He added: "As a last resort, if this doesn't happen, when the first lawsuits are brought against them the banks will have the ability to challenge the constitutionality of the law, and then the Constitutional Court will refer the matter to itself".

Among other things, the head of CEC said that the elimination of the First Home Program from the law was not the best choice: "There have been lengthy debates. Some have said that the program should be eliminated from the application of this law. It is not the best solution to remove something, but we need to choose the lesser evil".

Gheţea added that banks will look for niche solutions when it comes to lending: "Banks are constantly looking for solutions. We need to look for a niche in which to lend money, for instance holiday or education loans, whereas home loans will stagnate until the situation is corrected".

In his opinion, the fact that the amount allocated for the First Home program this year is nearing its upper limit means that Romanians are interested in borrowing and that they are concerned that once the law of giving in payment comes into effect, their access to loans with low downpayments will be restricted.

"It can be seen that Romanians rushed in the beginning of this year to take out loans under the First Home program. It is a good program, which has demonstrated its effectiveness, by helping raise the real estate market, of the construction market and has led to increased consumption. What will happen to the future of this program? The response comes naturally: it depends on what is going to happen with the Law of giving in payment", said Radu Graţian Gheţea.

Florin Dănescu, the executive president of the ARB, said, at a specialized conference, that the law of insolvency of individuals already provides solutions to the issues which have led to the initiation of the Law of giving in payment.

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