News (#12 December 2016)

Law Digest

Consumer Credit Act adopted in second reading

The Verkhovna Rada adopted the On Consumer Credit Act No.2455 in the second reading (currently the Act is being submitted to the President). The Act establishes the requirements for advertising in accordance with EU Directive 2008/48 on consumer loan agreements, namely, in terms of information on the effective rate of interest. The relevant decision prohibits advertising of 0% loans and loans with no documented evidence as of the financial condition of a borrower. The Act applies to all consumer loans, i.e. personal cash loans; family needs loans, and does not include loans for entrepreneurial purposes. The amount of overdue debt will be paid out in the first place, secondly Ч current payments of the Уprincipal amount of the loanФ and interest, and thirdly Ч any sum of penalties. Current legislation allows the lender to levy execution upon other property of the borrower in the event of mortgaged property being insufficient. Prior to signing the agreement the lender shall have to inform a consumer about the estimated cost of third partiesТ services (insurers, appraisers, etc.), if the latter is known to it. The Act does not oblige the inclusion of the cost of third party services in the calculation of the effective interest rate and aggregate value of the loan, as such cost may not be always known by the lender. If a customer delays payment of the loan part and/or interest for at least one calendar month, and on consumer credit secured by a mortgage, as well as on consumer credits for purchase of housing Ч for at least three calendar months, the lender has the right to request full repayment of the consumer credit, whose payment period is not yet due, if such a right is provided by an agreement. To do this, the lender shall notify a consumer about such violation in writing, indicating the actions needed to remedy it, and the period during which they should be performed. If the lender requires the making of payments, whose payment period is not yet due, or repayment of a consumer credit, such payments or repayment of a consumer credit shall be made by a consumer within 30 days, and on consumer credit secured by a mortgage, as well as on consumer credit for the purchase of housing Ч 60 days from the date of receipt of notice with such a requirement from the lender. The lender requirement does not apply if during that period a customer remedies violation of terms of a consumer credit agreement. If a consumer used the right of repayment of a consumer credit by increasing the amount of periodic payments, the lender is obliged to adjust obligations of a consumer towards their reduction and on a customerТs request to provide him/her with a new payment schedule. The consumer credit agreement may stipulate the manner of early repayment of a consumer credit.

New rules for state registration

On 16 November the Resolution of the Cabinet of Ministers No. 806 of 9 November 2016 came into force, regulating requirements of the so-called Anti-Raiding Act at sub-legislative level (the On Amendments to Some Legislative Acts of Ukraine Concerning Improvement of the State Registration of Rights to Immovable Property and the Protection of Property Rights). The Resolution establishes mechanisms of control over activities of state registrars, resolves issues of notaries and officials of local governments access to the data of the State Civil Register, issues of deprivation of the right to engage in notarial activities at the initiative of the Ministry of Justice, provides an opportunity to inform owners about registration activities conducted and submitted applications, etc. In particular, it stipulates the issuance of an extract from the Registry (signed and sealed) on conducted state registration of rights. It is formed by the state registrar in electronic form, is posted on the web portal of the Ministry of Justice and is issued in paper form on A4 sheets of paper without the use of any special forms, at the applicantТs request. The necessity to notify a property owner about submission of an application on actions with respect to his/her property is also stipulated. The message is sent by e-mail on the understanding that the latter is entered into the Register. The owner is not notified in case of state registration of rights as a result of a notarial act with his/her direct participation, of state registration of property rights on the basis of a certificate of inheritance or of state registration of termination of encumbrance of rights to immovable property under a contract of life maintenance or inheritance contract. At the same time, it was established that prior to changing the software of the State Register of Rights to Immovable Property, state registrars will notify property owners via their official or personal mail.

NBU eases some restrictions on foreign exchange market

The National Bank of Ukraine has, through its Resolution No.402 of 22 November 2016, eased some temporary restrictions for banks and their clients on the foreign exchange market. This shall expand the list of available foreign exchange transactions, provide opportunity to hedge currency risks and, consequently, will reduce pressure on the interbank foreign exchange market. Moreover, the regulator allowed banks-participants of international payment systems to buy and transfer foreign currency on the basis of individual NBU licenses if the purpose is to place a security deposit in foreign currency on accounts of international payment systems outside of Ukraine. Banks will be able to fulfill their obligations to international payment systems and will provide customers with the possibility to handle accounts using payment cards of international payment systems (VISA, MasterCard). Furthermore, the Resolution expanded opportunities for customers of resident banks as to purchase of foreign currency on the interbank market. Currently, they may carry out such transactions only on condition that the balance of their own funds in foreign currency is less than USD 25,000 (in equivalent). The NBU expanded the list of exceptions, which are not taken into account with respect to such balance. Now for its calculation, funds that are still on a customerТs account, but will be used on the day of foreign currency purchase for payments on the basis of payment orders not requiring entering to the appropriate registers, will not be taken into account. In addition, funds, which along with purchased currency, shall be used to fulfill obligations on import of goods transactions, will not be taken into account regarding such a balance.

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