1. Falling behind schedule under a consumer loan will trigger for borrowers-consumers penalty interest rates, calculated by adding max. 3 percentage points on the top of the loan interest rate (see footnote, art. 38 para. (2) of O.U.G. 50/2010). The penalty rate will refer exclusively to the amount of overdue instalments of principal and will automatically start running from the date when overdue amounts are registered.

2. The continuous existence of overdue amounts for a period of 90 consecutive days is the only statutory condition to be achieved, that would enable a creditor to call the entire loan due by „declaring its maturity / early due date” (idem, para. (9)), which is also the moment from when, in lieu of the penalty rate referenced above, a different penalty rate is triggered and will accrue, calculated by adding max. 2 percentage points to the loan interest rate (idem, para. (6)).

3. This time, the interest rate is to be computed on the full unrepaid amount of the loan, which became due and payable because of the creditor’s “declaration of loan maturity / early due date”. Thus, depending on circumstances, it is possible that this new penalty rate (max. 2 points), though smaller than the first rate (max. 3 points) in absolute percentage terms, may exceed all interest accrued on overdue instalments prior to “early due date” statement.

4. The creditor’s ‚declaration’ calling the loan due is a legal notion remained undefined in this piece of legislation, but it is certain to have the effect of removing the loan repayment schedule, which is tantamount to terminating the loan contract itself. Hence, it can be argued that the statement in question cannot be anything else than a way to unilaterally terminate the loan contract, a conduct which has a sanctioning role, being triggered by and sent in response to consumer’s failure to pay the overdue amounts during a period of 90 consecutive days.

5. It can be maintained that the calling of “early maturity” cannot be viewed as a mere variation of repayment terms in a consumer loan contract that otherwise would continue to exist between the contracting parties, because the amount yet to be repaid cannot constitute a ‘new’ loan, which was extended and concomitantly called due and payable as well. It is difficult to explain the reason why the law introduced the penalty rate on the entire loan amount, when considering that the relevant funds have never qualified as due amounts.

6. The creditor’s wish as manifested via the calling of „early maturity” is not to pursue the continuation of an ongoing banking operation or a consumer credit relationship; to the contrary, it aims ar halting the credit relationship by immediately calling due all funds that were extended as loan, and closing the books. Regardless, it would be unrealistic for a creditor to expect a debtor who’s incurred overdue amounts for a period of 90 consecutive days, to be at the same time, and only because it received a statement calling the entire loan due and payable, in a position to immediately provide the necessary funds to repay the entire credit.

7. Notably, the law only offers the creditor an option (a possibility), as opposed to instating an obligation, to „declare maturity date”: it neither compels the creditor to resort to it, and should the creditor choose to raise it, nor does it require the creditor to do so on a certain date as the law might have prescribed. The sole legal requirement is that a creditor may not consider the option of calling the loan maturity except in situations of overdue amounts continuing to exist for a period of at least 90 consecutive days.

8. Therefore, unless prudential rules or other reasons stay in the way, the creditor seems to be able to freely assess, on the basis of the client’s file and its creditworthiness, as to either to postpone triggering the “maturity date”, thus keeping the contract alive and ongoing, or to swiftly proceed with such step, thus choosing to terminate the consumer loan contract, or, alternatively, to pick some other moment in time it deems suitable to make the maturity statement.

9. Consequently, since the last date when the penalty can run against the debtor is the date when the creditor will have declared “early due date”, and such moment is not known as it depends on the will of the creditor, it results that the effective aggregate value of penalty rates accruing on overdue principal instalments remains an element left largely at the discretion of the creditor.

10. If the creditor postpones calling „early due date” indefinitely, the penalty rate of max. 3 percentage points on top of the loan’s interest rate could run beyond the hypothetical term of 6 months (idem, para. (10)), as such period refers to the 2-percentage points rate, which cannot activate itself in the absence of the „early due date” declaration. The only caveat in the law prevents a situation where the accumulated amount may exceed the overdue principal (idem, para. (5)).

11. Equally unclear to the debtor is the moment when the added penalty rate of 2 percentage points starts to run (idem, para. (6)), since such moment likewise depends on the will of the creditor, as it is linked to the maturity statement. For instance, if the creditor chooses to declare “early due date” 6 months before the expiry of the statutory limitation period for enforcement of claims, then the 2-percentage point penalty rate as calculated on the entire loan will apply during the 6 months until enforcement is launched.

12. The notion of ‚enforcement’ comes into play in a contradictory manner. The impossibility of proceeding with official enforcement during 3 months from claiming the loan maturity (idem, para. (10)) may suggest that the term should benefit the borrower, yet the same legal text goes on to also admit as perfectly realistic a situation where, for various reasons, enforcement remains untriggered even 6 months from a maturity statement (idem, para. (10), second part).

13. During the 3-month period, penalty interest continues to accrue at borrower’s expense. Also, this term as introduced in the law will necessarily extend the statutory limitation period, thus prolonging the ‚life duration’ of the claim. Under such circumstances, one may raise the question as to the purpose envisaged with this period of 3 months, which suspends the right to enforce; more precisely, whether or not the period was indeed established by the law for the exclusive benefit of the debtor-consumer-borrower.

14. The law sets out certain invariable elements (the minimum period of 90 days, the 3-month term, ceilings for penalty rates), but at the same time it allows certain elements to be variable, such as the decision to terminate or continue the contract or to influence the actual accrual periods and related interest amounts. Such variable elements seem to be left to the exclusive discretion of the creditors.

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Footnote
Article 38 of Section 1 (Common provisions), Chapter IV (Information and rights concerning credit agreements):
(2) The default interest rate shall be calculated on the basis of a fixed percentage not exceeding three percentage points, which shall be added to the current interest rate and applied to the outstanding principal.
(3) The interest rate applicable to overdue loans may not exceed by more than two percentage points the interest rate applied when the credit is not in arrears, if the consumer or his spouse was in one of the following situations: unemployment, […]
(4) It shall be prohibited to apply default interest to the credit balance or to the total amount of credit or to the total amount payable by the consumer.
(5) In all cases, the amount of default interest shall not exceed the outstanding principal.
(6) After the early maturity has been declared, only default interest may be charged, calculated on a fixed percentage basis and not exceeding two percentage points, to be added to the interest rate provided for in the contract.
(7) By way of exception from the provisions of art. 38 paragraphs 2 and 4, default interest shall be applied to the debt due. It is forbidden to charge other interest after the declaration of early maturity.
(8) During the enforcement procedure, it shall be prohibited to collect interest and penalty interest.
(9) The creditor may declare the credit due early after the consumer registers a number of 90 consecutive days in arrears.
(10) The period between declaring the early maturity and triggering the forced execution cannot be less than 3 months. At the express request of the consumer, the creditor shall reduce this period. If enforcement is not initiated within 6 months from the date of declaring the early maturity, starting with the day immediately following the expiry of this term, the creditor will no longer charge penalty interest.

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Avocat Dan Jalba, Baroul București