Microcredits were curbed by law: credit histories will be kept more carefully, and fines and penalties will be limited

It seems that in Ukraine decided to reduce problem debts and take care of those irresponsible borrowers who, having taken a quick loan "before payday", then forget about their obligations and fall into financial cabbala to the lender.

Law No. 891-IX "On Amendments to Certain Laws of Ukraine Concerning Consumer Lending and the Formation and Circulation of Credit Histories" was signed by the President was recently officially promulgated and will come into force on January 1, 2021.

The problem that exists today is due to the fact that two categories of financial services were removed from the scope of the Law "On Consumer Lending", which were called "microcredits":

- agreements containing a condition on a consumer loan in the form of lending to an account with a loan maturity of up to one month, loan agreements concluded for a period of up to one month;

- loan agreements, the total loan amount for which does not exceed one minimum wage established on the day of the loan agreement conclusion.

Since there were no guarantees of protection for those who took out loans for less than a month or for an amount up to one minimum wage, financial organizations actively used this gap in order to make money on irresponsible citizens.

Read more about this in the article by Timur Mikhailov, a lawyer of Skliarenko, Sydorenko and Partners, "Beware, instant credit online!" for "Economichna Pravda".

The new law classified such microcredits as consumer lending. Thus, the prerequisites were created for proper regulation and control in this area, while respecting the legitimate interests of market participants.

In particular, with respect to credit transactions, which are subject to the Law on Consumer Lending, financial institutions will have to transmit information to the Credit History Bureau no later than two business days from the date of the credit transaction or the change in information about the borrower.

Separately, the legislator has prescribed that the aggregate amount of the forfeit (fine, penalty) and other payments to be paid by the consumer for violation of the fulfillment of obligations on the basis of a consumer loan agreement, the total loan amount for which does not exceed one minimum wage, cannot exceed the double amount received by the consumer under such a contract and cannot be increased by agreement of the parties.

For violation of the consumer's fulfillment of obligations under the consumer loan agreement, the total amount of the loan for which does not exceed the size of one minimum wage, the interest rate on the loan, the procedure for calculating it, the procedure for paying interest cannot be changed downward for the consumer.

In addition, at the legislative level, the application of a fine and a penalty for the same violation by a consumer of an obligation was prohibited.