On February 4, 2023, the “Amendments to the Civil Code” Law was adopted. According to the amendment, Article 13 of the Civil Code was changed, and Article 37 (“Debt”) is given in a new edition. Changes were made in two directions:
One of the most important changes to the legislation is the separate regulation of debt relations and credit relations and the addition of new provisions to the Civil Code relating to credit agreements. For better protection of borrower and consumer rights, the norms regulating the agreement have been improved.
What does the change in the credit agreement include?
- A lender cannot lend for the purpose of acquisition of a share (stock) in his authorized capital. In addition, his shares (stock) in the authorized capital cannot act as a guarantee for the execution of the debt obligation to the lender. These steps aim to prevent the repurchase of shares (stocks) from being indirectly financed by the borrower.
- The definition of the day on which the subject of the loan agreement (money or other exchangeable items) is given and returned is regulated in detail;
- Interest will be calculated not on the entire loan amount but only on the amount of the outstanding principal balance until the due date;
- Only persons duly authorized to grant credit may act as regular lenders for commercial purposes and may lend to an unlimited number of persons.
- New type of agreement—a consumer credit agreement—is defined. According to this, the lender lends money to the borrower, who is an individual, for purposes not related to entrepreneurship or professional activity, and the consumer undertakes to repay the debt received in the manner and within the period specified by the contract, subject to the payment of interest and/or other payments specified in the contract.
- The purpose of this type of contract is to introduce special measures (e.g., an initial information system to avoid misunderstandings, prohibition of unstable interest rates, interpretation of all uncertainties in favor of the consumer, etc.) to protect consumers.
- The consumer credit agreement can be refused without giving any reason within 30 (thirty) days from the day of the payment of funds under the consumer agreement. In this case, the purchasers must pay the money given under the contract and the interest calculated from the day of giving the money until the day it is returned. Except for the amount of state duty and service fees paid by the lender, compensation and any other payments from the consumer are not allowed.
- Reflection of technological innovations. The law covers the following changes in this field:
- Although it was not mentioned in the Civil Code before the amendment, the Constitutional Court noted the legality of concluding the contract with electronic means of communication in the Plenum Decision dated August 12, 2020, on the interpretation of Article 407.2 of the Civil Code. According to the amended new content of Article 331.1 of the Civil Code, a contract is considered to be in written form when it is concluded with the help of electronic or other technical means that allow its content to be reflected in an unchangeable form on a material carrier. The signature requirement is considered to be fulfilled if any method is used that allows honest identification of the expression of will. A special method (method) that allows to accurately identify a person may be defined by law, other legal acts, or the agreement of the parties.
The law entered into force on October 1, 2023.