Tuesday, February 6 2018 17:53
Alina Hovhannisyan

Finombudsman: Amendments to the Civil Code on the imposition of fines and penalties will reduce the number of outstanding loans and non-creditworthy consumers

Finombudsman: Amendments to the Civil Code on the imposition of fines and penalties will reduce the number of outstanding loans and  non-creditworthy consumers

ArmInfo. At the end of 2017  at the meeting of the Armenian parliament in the first reading  amendments were made to the RA Civil Code concerning restriction of  the rights of commercial banks and credit organizations of Armenia in  the accrual of fines and penalties. To learn more about the specifics  and consequences that these changes can bring with them, ArmInfo  talks to the Financial Ombudsman of Armenia, Mrs. Piruz Sargsyan.

The Parliament recently approved a draft amendment to the RA Civil  Code concerning the restriction of commercial banks and credit  companies in the rights to impose fines and penalties. In this  regard, it would be interesting to know how many complaints are  received by the FinOmbudsman office from borrowers (banks and credit  companies) regarding the excesses of assessed fines and overdue  notification of delinquency?

First of all, I would like to note that these amendments were adopted  on December 14, 2017. Entered into force on January 8 this year and  apply to credit agreements that were concluded, respectively, after  the amendments entered into force. According to Article 372 of the RA  Civil Code, the established maximum penalty rate for fines can not  exceed 4 times the maximum rate set by the regulator for banks. At  the same time, the accrued penalties and pennies for the customer's  debts cannot exceed the double size of the principal amount of the  loan, irrespective of the time of the delay.

As for complaints from borrowers regarding the amount of assessed  fines, if we consider the overall statistics of our applications,  then this figure is not large. Nevertheless, there are cases that  cause fear, and in connection with this, the adoption of these  amendments in RA legislation was necessary. Changes, I regard, only  from a positive point of view.

Then how relevant was the adoption of the law?

The urgency of this law is primarily that if earlier, according to  the 372nd article of the RA Civil Code, the amount of accrued  penalties and pennies could be reduced only by a court decision, and  basically in cases when the party itself filed an appropriate claim.  With the entry into force of the Act in certain cases, if the amount  of fines obviously does not correspond to the consequences of  violations other than the court, the Financial System Mediator also  receives the authority to reduce the amount of penalties and pennies.  At the moment, very often the total amount of loans with accrued  fines and pennies is several times higher than the income of  consumers, and then the exit from the debt hole becomes almost  impossible. As a consequence, this situation negatively affects both  the consumer and the lender, and the financial market as a whole. I  believe that these problems will be resolved through new amendments,  and the burden of consumers will be facilitated, which, of course,  will positively affect the financial market.  In particular, if we  consider international trends in the development of the financial  sector, we will see that in many countries the issue of lending to  natural persons is settled in this way. In particular, in the region.   In Russia and Kazakhstan, these changes were made quite a long time  ago. In addition, recently we held a forum, to which the  representatives of the financial structures from countries where the  sphere was sufficiently settled were invited. We had guests from  South Africa, Australia, who shared their experience in the matter of  consumer protection, in particular in terms of reducing the credit  burden. Based on the experience of colleagues, I can say that the  problems relating to the accrual of fines and penalties will be  settled thanks to this bill.

And how can these changes affect the performance of financial  institutions?

We do not have such statistical data on financial organizations and  their indicators, therefore, we can not make any conclusions and  forecasts. Perhaps in the beginning there will be some difficulties,  but I believe that the financial organizations are quickly adapting  to the changes that, as a result, will benefit them and the financial  market as a whole. As the number of outstanding loans and  non-creditworthy consumers will decrease.

Is there a risk that due to the entry into force of the Law, the  share of overdue loans in the banks of Armenia will increase? Does  this Law carry such risks?

I believe that these amendments do not carry risks in themselves,  since on the one hand the creditor has the right to demand from the  borrower an amount equal to the double amount of the principal amount  of debt for the current moment, and on the other hand, consumers can  make more rational decisions, in particular, correctly calculate your  income and assess the possible maximum losses before you go to  lending.

The amendments to the Civil Code will oblige the lender to notify the  borrower on time, because otherwise no fines and penalties can be  applied against the borrower. Moreover, banks and credit companies  often wait for several months, and even a year before declaring a  debt. 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  penalties.

POST A COMMENT
Input digits     


News
At request of Belarusian partners, Armenian inspectors to check  Ararat Brandy Factory products At request of Belarusian partners, Armenian inspectors to check  Ararat Brandy Factory products 
Syunik governor not familiar with details of residential house  construction project in ShurnukhSyunik governor not familiar with details of residential house  construction project in Shurnukh
Water tariff to not change in Armenia in 2024 at expense of subsidies  from state treasuryWater tariff to not change in Armenia in 2024 at expense of subsidies  from state treasury
Armenia`s gross international reserves even farther from historical  maximumArmenia`s gross international reserves even farther from historical  maximum
Armenia to take out EUR 92.3mln from WB to cover budget deficit  Armenia to take out EUR 92.3mln from WB to cover budget deficit  
Armenia, Kazakhstan to establish joint business club  Armenia, Kazakhstan to establish joint business club  
Bolat Imanbayev: Armenia-Kazakhstan trade and economic relations are  developing dynamically; nevertheless, they do not reflect  countries`  full economic potentialBolat Imanbayev: Armenia-Kazakhstan trade and economic relations are  developing dynamically; nevertheless, they do not reflect  countries`  full economic potential
Kazakhstan offers Armenia to consider new alternative logistics routeKazakhstan offers Armenia to consider new alternative logistics route
Dependence of Armenia`s economic activity on jewelry industry could  cause problems - Luys FoundationDependence of Armenia`s economic activity on jewelry industry could  cause problems - Luys Foundation
AraratBank places its 27th issue of dollar bondsAraratBank places its 27th issue of dollar bonds
Viva-MTS changes its company name to Viva ArmeniaViva-MTS changes its company name to Viva Armenia
Deputy Minister of Economy: Armenia-Russia cooperation potential may  be realized through cooperation projects in production sectorDeputy Minister of Economy: Armenia-Russia cooperation potential may  be realized through cooperation projects in production sector
Team Systems contributes to smart technology development Team Systems contributes to smart technology development 
Who will be beneficiaries of tax amnesty in ArmeniaWho will be beneficiaries of tax amnesty in Armenia
Belarus bans import of Ararat Brandy Company products Belarus bans import of Ararat Brandy Company products 
5 000 dram Bonus from IDBank for Pension Card Holders5 000 dram Bonus from IDBank for Pension Card Holders
Armenia`s public debt reaches $12 billionArmenia`s public debt reaches $12 billion
Price index of industrial products is decreasing in ArmeniaPrice index of industrial products is decreasing in Armenia
Industrial sector driver of economic activity in Armenia Industrial sector driver of economic activity in Armenia 
Armenian CB issue s new collector coins Armenian CB issue s new collector coins 
99.8% defense budget performance in 202399.8% defense budget performance in 2023
IDBank issues the 1st tranche of dollar bonds of 2024IDBank issues the 1st tranche of dollar bonds of 2024
AFD delegation presented with details of Vedi reservoir construction  and irrigation network modernization projectAFD delegation presented with details of Vedi reservoir construction  and irrigation network modernization project
Parliamentarian: Armenia attaches great importance to using  opportunities of digital transformationParliamentarian: Armenia attaches great importance to using  opportunities of digital transformation
DPM: we need not only quantitative increase, but also qualitative  changes in urban development field DPM: we need not only quantitative increase, but also qualitative  changes in urban development field 
​​​​​​​IDBank as a Participant in the Conference of My Forest Armenia NGO​​​​​​​IDBank as a Participant in the Conference of My Forest Armenia NGO
ENA bonds quotation in volume of AMD 32 billion to start on AMX from  March 27ENA bonds quotation in volume of AMD 32 billion to start on AMX from  March 27
Switzerland launches SIGMA program with total budget of CHF 12  million Switzerland launches SIGMA program with total budget of CHF 12  million 
Armenia`s State Revenue Committee launches e-system of income  statement presentation  Armenia`s State Revenue Committee launches e-system of income  statement presentation  
Armenia`s ranking in Index of Economic Freedom decreased by 0.2 pp  over yearArmenia`s ranking in Index of Economic Freedom decreased by 0.2 pp  over year
France to sponsor establishment of cheese-making school in Armenia`s  Tavush France to sponsor establishment of cheese-making school in Armenia`s  Tavush 
The South Caucasus Railway will suspend the sale of tickets using MIR cards The South Caucasus Railway will suspend the sale of tickets using MIR cards
Azerbaijan continues attempts to Azerbaijan continues attempts to "hit" Armenian nuclear power plant
Armswissbank participates in gcf regional dialogue in skopjeArmswissbank participates in gcf regional dialogue in skopje
IDBank issues the 1st tranche of dollar bonds of 2024IDBank issues the 1st tranche of dollar bonds of 2024
Extending ANPP`s lifetime until 2036 will lay solid foundation for  smooth transition to new power unit - Pashinyan at Nuclear Energy  SummitExtending ANPP`s lifetime until 2036 will lay solid foundation for  smooth transition to new power unit - Pashinyan at Nuclear Energy  Summit
Armenia`s government approves order of quality prize awards Armenia`s government approves order of quality prize awards 
International Client’s Day at IDBankInternational Client’s Day at IDBank
Germany to provide loan for Armenia`s renewable energy sector Germany to provide loan for Armenia`s renewable energy sector 
2023 lending growth insufficient to prevent decline in profits -  Financial Rating of Banks of Armenia2023 lending growth insufficient to prevent decline in profits -  Financial Rating of Banks of Armenia
Iran interested in cooperating with Armenia in mining industry Iran interested in cooperating with Armenia in mining industry 
Armenian government plans to introduce SAFE format Armenian government plans to introduce SAFE format 
Service of Armenian ArCa cards in Russia and of Russian MIR cards in  Armenia to be suspended Service of Armenian ArCa cards in Russia and of Russian MIR cards in  Armenia to be suspended 
Termination of service of MIR cards. IDBankTermination of service of MIR cards. IDBank
Economic modernization programme portfolio AMD 228bln as of March 1,  2024Economic modernization programme portfolio AMD 228bln as of March 1,  2024
Mobile trade regulations to be in effect throughout Armenia Mobile trade regulations to be in effect throughout Armenia 
Official cites financial reasons for suspension of Fly Arna airline  operation Official cites financial reasons for suspension of Fly Arna airline  operation 
Subsidiary of Public TV of Armenia to have right to nationwide  broadcasting  Subsidiary of Public TV of Armenia to have right to nationwide  broadcasting  
About 700 Armenian heavy cargo trucks waiting to pass through Upper  LarsAbout 700 Armenian heavy cargo trucks waiting to pass through Upper  Lars
Armenian Economy Ministry, several U.S. government departments form  specific action program Armenian Economy Ministry, several U.S. government departments form  specific action program 
Public TV`s First News Channel to be broadcasted not only in Yerevan,  but also throughout countryPublic TV`s First News Channel to be broadcasted not only in Yerevan,  but also throughout country
Ardshinbank cardholders can now enjoy a 10% cashback!Ardshinbank cardholders can now enjoy a 10% cashback!
“G20/OECD Principles of Corporate Governance” workshop“G20/OECD Principles of Corporate Governance” workshop
ECC, EDB to coordinate funding of joint projects ECC, EDB to coordinate funding of joint projects 
Broadcasting of Russian TV channels to be discussed in Moscow soon Broadcasting of Russian TV channels to be discussed in Moscow soon 
Armenia to host World Wine Tourism Conference,Armenia to host World Wine Tourism Conference,
CBA forecasts 5.5% or 6.4% GDP growth for 2024 depending on inflation  rate  CBA forecasts 5.5% or 6.4% GDP growth for 2024 depending on inflation  rate  
Three Sad Stories about FraudstersThree Sad Stories about Fraudsters
Rafayel Gevorgyan: Armenia`s economic growth potential is 6%Rafayel Gevorgyan: Armenia`s economic growth potential is 6%
TEAM already has over 1 million mobile subscribersTEAM already has over 1 million mobile subscribers
Read more


Exchange rates
28.03.2024
RUB4.270.00
USD394.46-0.25
EUR425.62-1.93
GBP497.65-0.91
CAD290.11-0.27
JPY26.06-0.05
CNY54.57-0.05
CHF435.72-0.13