The Parliament has accepted the bill on the modification of Act CLXII of 2009 (hereinafter: Fhtv.) and published the above Act on the Fair Banking system – practically without any change in it - in the national agenda on 5th December 2014. slight modifications are due to the meanwhile introduction of new legal instrument, thus the new Act excludes the provisions of the bill on the settlement of consumer loan agreements.
The new Fair banking Act in compliance with the new Ptk. regulations stipulates and stricken the financial institutions’ obligation of providing information for consumers. As a result, the financial institution shall provide a full range of information on the loan selected by the consumer and on other similar loans, and shall provide a sample for loans on their websites. The conditions of providing detailed information will be specified in a separate decree of the Ministry of Economics.
According to the Act, financial institutions may modify unilaterally only – in compliance with the Act on credit institutions and financial enterprises - the interest, the interest surcharge, the costs and the fees. Other conditions may not be modified unilaterally disadvantageously for the consumer. The unilateral modification right of the financial institution shall be explicit. The condition is invalid if does not comply with the conditions of unilateral modification.
Unilateral modification will be bound by the duration for the loan agreement. The Fair banking Act kept the differentiation of the bill concerning the loans. Thus, different rules will apply to agreements with a 3-year- duration and different ones to agreements with more than 3 year duration.
The Act differentiates between fix-interest and changing-interest loan agreements concerning loans with duration of less than 3 years. In case of a fix-interest loan the interest shall not be modified. On the other hand, in case of a reference-rate loan, the reference-rate may change- as it is regarded as an automatic change and not a unilateral one -, but the base-rate/margin shall not change.
The Act also differentiates in case of loans with duration over 3 years. The two types of these loans are the loans with reference-rate and the loans with changing-interest. In case of reference-rate loans, the reference-rate and the base-rate may also change. The base-rate may only change in 3 years interest-periods. An index shall be applied to indicate the change in the base-rate and the financial institution shall inform the consumer about it prior to concluding the loan agreement. The interest in loan agreements with changing-interest shall be modified in 3 years interest periods as well.
A maximum number of five modifications are set by the Act under the entire duration of the concluded loans regarding the modification of interest-rate and base-rate.
The creditor may modify only the explicitly specified costs in the loans. The modification shall be proportionate to the increase of the cost. Fees may be modified according to the harmonised index of consumer prices (HICP) set by the Hungarian Statistic Agency (KSH). Costs and fees may be modified annually till 1st April.
The Act also sets limitations to the maximum extent of the default charges in case of late-performance on the consumer’s side.
The consumer is entitled to terminate the contract free of charge and all costs if the interest or the base-interest changes disadvantageously for him after the interest period.
Moreover, the consumer is entitled to prepayment under the interest period, if he reimburses its costs for the financial institution. The extent of the reimbursement is specified by the 2008/48/EC directive.
The Fair banking Act sets the partial invalidity as the general rule, as full invalidity constitutes in a disadvantageous situation for the consumer. According to this, if the lack of legally required conditions does not affect the validity of the contract then the creditor financial institution shall reimburse the consumer’s damage according to the liability for any loss caused by non-performance.
Certain provisions of the Act shall apply for the surety and for the lien holder as well, since the status of the surety is normally worse than the debtor’s. Therefore the creditor shall provide adequate information for the surety and for the lien holder prior to concluding the suretyship or lien. The surety and the lien holder are also entitled to prepayment of the loan.
The Act grants the right with the approval of the MNB for the interest-representation bodies of the financial institutions to apply sample business policies, in order to - by initiating the banks to provide and apply same business policies and general contractual terms similarly to the German and Austrian practice - ease the consumer’s situation by enabling them to assess the general contractual terms in the market.
According to the Fair banking Act financial lease agreements concluded by a consumer and financial institution are regarded as loans and are still under the scope of the Act. The legislator does not intend to make a change in its term or in the consumer’s term. On the other hand, with regard to the recent legislation practice we cannot say for sure that this may not change in the foreseeable future and every loan agreement– including financial lease – will come under the scope of the Act and other relevant legal regulations, thus protecting not only the consumers but all representatives of the business market.