On April 1, 2021, a new rule of protection of consumers' rights while providing services by financial organizations came into force, which replaced the order issued by the President of the National Bank of Georgia on December 23, 2016.
According to the new version of the rule, the liabilities of financial organizations (commercial banks, microfinance organizations, loan disbursing company and non-bank depository institutions - credit unions) towards consumers have increased even more, namely:
• In case of refusal to grant a loan, if the reason for the refusal is the data reflected in Creditinfo, the financial organization is obliged to immediately, without incurring any additional costs, notify the customer of the reason for refusing to grant the loan;
• The new regulation introduced the concept of "General Agreement". A general agreement is defined as a basic agreement on customer service with financial products, except for a credit line agreement under which a specific financial product agreement is entered into. Financial institutions have an obligation to inform customers in detail about the risks associated with the general contract;
• The financial organization was obliged to offer at least 3 (three) different insurance companies for property and life insurance in case of financial product insurance. Under current regulations, financial institutions have defined themselves as the specific insurance company in which the property or the borrower's life was to be insured in connection with the loan. Moreover, under the new version, consumers were given the opportunity to submit an insurance policy to the financial organization from the insurance company of their choice (which must meet the minimum insurance requirements set by the financial organization), and the financial organization has no right to refuse to accept it without justification;
• The deadline for notification of unilateral change of the terms of the contract by the financial organization has been increased. The financial institution is obliged to notify about the significant changes in the specific financial product at least 2 (two) months before the change, and in case of increase in the price of another financial product - at least one month in advance. However, only an announcement posted in a public space about a change in the terms of the contract will not be considered as providing information to the customer.
Another innovation is that with the new version of the rule, in addition to the consumer, the guarantor of the borrower and the owner of the collateral are also subject to special protection. In particular:
• In case of change of the terms of the contract, the financial organization is obliged to send a notification not only to the borrower, but also to the guarantor and / or the owner of the collateral;
• The obligation to inform the financial organization has increased, as well as in case of overdue loan, in particular, the financial organization is obliged to notify the borrower not only within 5 (five) working days, but also the guarantor and the owner of the collateral;
• The financial institution is obliged to give written notice / warning to the guarantor and the owner of the collateral that during the term of the general agreement, within the limit set by the same agreement, in case of additional credit to the lender, their additional consent will not be required and their collateral will be covered by the general agreement. On all loans issued. In addition, when issuing any new loan under the General Agreement, the financial institution will be obliged to notify the guarantor and / or the owner of the collateral about this no later than 5 (five) working days after the loan is issued;
The rights of financial institutions have been restricted in the sense that they will no longer have the right to breach a customer's time deposit in order to repay a loan and use it to satisfy a claim, unless the said time deposit is pledged to secure the loan and the mortgage is registered in the public register.
According to the new edition, consumer rights have been increased in several areas:
• If the customer uses several financial products at the same time and has to repay them at the same time, the customer is given the right to choose the order of loan repayment, in particular, at the loan repayment stage, the customer must indicate which loan to repay first. Preliminary agreement between the parties on this issue is inadmissible;
• If the customer has money in a bank account in different currencies, he is given the right to choose the conversion priority when repaying the loan amount.
It should be noted that the new regulation also reduced the maximum amount of advance and refinancing fees, which under the previous regulation was 2% for both indexed and variable-rate loans. According to the new edition, different maximum amounts of commissions were set for each type of loan interest rate (fixed, indexed, variable). In particular, in the case of variable-rate loans, the advance / refinancing fee may not be more than 1% of the remaining principal amount of the loan, and in the case of indexed loans (eg, refinancing rate, Libor or other public index) - no more than 0.5%.