With restrictions due to the ongoing COVID-19 pandemic, many people may find themselves in financial distress. Parliament has therefore passed a law that regulates the procedure for deferring loan and credit repayments.
With restrictions due to the ongoing COVID-19 pandemic, many people may find themselves in financial distress. Parliament has therefore passed a law that regulates the procedure for deferring loan and credit repayments.
According to a law passed in mid-April this year, both consumers and businesses have the option to defer certain payments. The law applies not only to traditional loans and credits, but also to so-called deferred payments, which are very popular today, for example, for orders from e-shops. Although some financial institutions dealt with deferred payments before the law was adopted, the new rules are uniform for all applications.
To defer payments, you need to notify the lender that you want to take advantage of the so-called protection period for your payments. According to the law, it is not necessary to show that you are particularly affected by the current restrictions. The protection period always starts on the first day of the month following your notification and lasts until either 31 July 2020 or 31 October 2020 at your choice.
During this protection period, you do not have to repay the so-called principal of your debt – that is, the actual amount you borrowed – and payment of the principal or repayments is deferred for the length of your chosen protection period. However, it is important to remember that you must also pay interest to the lender for the period up to July or October. And while for consumers the interest for this period is capped by law (at a maximum of the so-called repo rate announced by the CNB and increased by eight percentage points), for businesses the agreed interest applies even after this period. In the case of individuals, the maturity of the loans themselves is also deferred (subject to certain conditions in the law), but legal entities must also pay interest during the protection period.
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The law also allows that during the protection period, the credit provider should not be able to request certain ancillary payments – such as an account maintenance fee. However, this again applies only to natural persons; legal persons must also pay these fees during the protection period.
It is important to find out the most convenient way to file the notification directly with the lender. Of course, the notification can be made in writing (so that you also have proof of delivery), but the law requires lenders themselves to specify at least one option for making the notification by remote communication. Not only is it important to accurately identify the person affected by the deferral and the loan in question in the notice, but you also need to state that the person intends to use the protection period because of the negative economic impact of the COVID-19 pandemic on him or herself.
If all the legal requirements are met, the lender will promptly acknowledge receipt of your notification and send you a detailed summary of the duration of the protection period and your obligations after it ends within 30 days. This whole process is free of charge by law and even if the lender charges a fee for deferring repayments, such an arrangement will automatically be void.
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