NEWSLETTER COVID-19 FROM THE PERSPECTIVE OF LOAN REPAYMENT
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The purpose of this Newsletter is to clarify the basic issues of Act No. 177/2020 Coll. on certain measures in the field of loan repayment in connection with the COVID-19 pandemic (hereinafter referred to as the “ Act ”), namely:
Scope of the law
Types of loans
Duration of the so-called protection period
Effects of the so-called protection period
The amount of interest during the so-called protection period
Requirements for notification of the use of the protection period
Prohibition of certain payments, debt deferral agreement, restrictions on the creditor's disposal of property during the protection period
1. Scope of the law
Pursuant to § 2 letter b) of the Act, for the purposes of this Act, a creditor is a consumer or entrepreneur to whom a loan has been provided, or to whom he has transferred, or who has taken over a debt from such a loan.
According to § 2 letter c) of the Act, the lender is then the one who, as an entrepreneur, provided a loan to the lender or who acquired a receivable from the loan thus provided.
2. Types of loans
Section 3 of the Act subsequently defines to which loans the Act applies.
Pursuant to Section 3 (1) of the Act, the Act shall apply to a loan agreed and drawn before 26 March 2020.
Furthermore, the Act in § 3 para. 2 lists which loans agreed before March 26, 2020 are further applied by the Act. With regard to § 3 paragraph 1 of the Act, it can therefore be concluded that these are loans agreed before 26.3.2020, but not drawn - e.g.
loan secured by real estate,
certain types of earmarked loans (for construction, alteration of building, acquisition of rights to immovable property, etc.)
a loan provided by a building society in accordance with the law governing building savings
Furthermore, § 3 paragraph 3 of the Act defines for which loans resp. in which situations the Act does not apply.
a) a loan for which it was lent as at 26 March 2020 in arrears of more than 30 days with the performance of the monetary debt,
b) a loan for which the creditor is a pension company or a regulated entity pursuant to the law governing supplementary supervision in financial conglomerates,
c) a loan intended for trading in an investment instrument ,
d) an investment instrument, a liability the subject of which is an investment instrument or a liability from which a receivable of a financial nature arises pursuant to the Financial Collateral Act , which is secured by financial collateral,
e) a credit line that can be drawn repeatedly after partial or full repayment,
f) deferred payment , if such deferral is not charged and the length of deferral is not in conflict with normal business practice,
g) rental of a thing or leasing, for which the obligation to purchase the subject of the contract or another possibility of acquiring ownership after a certain period has not been agreed ,
h) the continuous provision of a service or the supply of goods of the same kind for which the creditor may pay in the course of their provision in the form of installments,
(i) a loan, the provision of which leaves the movable property to the lender and does not give the lender the right to a refund , or
(j) a financial guarantee.
3. Duration of the so-called protection period
The Act distinguishes between abbreviated and classic protection periods. The condition is that the creditor has been notified by the creditor that he intends to use the protection period.
According to § 4 of the Act, the following applies:
The protection period lasts from the first day of the first calendar month following the day on which the creditor was notified of the creditor that he intends to use the protection period,
(a) until 31 October 2020 , or
(b) by 31 July 2020 , if the creditor indicates in the notification that he intends to benefit from such a reduced protection period .
4. Effects of the so-called protection period
The length of the protection period is postponed by the time of fulfillment of the monetary debts of the lender against the lender from the loan agreement. The duration of the loan security is extended by the length of the protection period.
If insurance of the insurance risk related to the loan in which the lender is the policyholder has been arranged, the lender shall notify the lender without undue delay of the lender's obligations related to the duration of this insurance during the protection period and which the lender is obliged to perform during the protection period.
The length of the protection period is extended by the period for which a fixed lending interest rate has been agreed and.
5. The amount of interest during the so-called protection period
The Act defines under what conditions and in what amount the right to interest arises for the lender during the protection period and under what conditions the interest does not accrue and is payable.
According to § 5 paragraph 3 of the Act
For the duration of the protection period , the lender has the right to interest , which in the case of the lender , which is
a) by the consumer , corresponds to the interest determined by the lending interest rate in the amount of the repo rate announced by the Czech National Bank increased by 8 percentage points, unless lower interest was agreed,
b) by an entrepreneur, corresponds to the interest that has been agreed .
According to § 5 paragraph 4 of the Act
Pursuant to Section 5 Paragraph 3 of the Act, interest does not bear interest and is payable if it is credited
a) a natural person , after the fulfillment of all monetary debts, the performance of which has been deferred, while the performance of the creditor is credited to this interest only after the fulfillment of all monetary debts, the performance of which has been postponed, if the performance is agreed in installments, the amount of installments remains unchanged and the duration of the loan shall be adjusted accordingly, unless the creditor and the creditor agree otherwise,
(b) by a legal person, during the term of protection at a time agreed.
For the duration of the protection period, the lender does not acquire the right to other continuously paid payments agreed in the loan agreement other than interest; this does not apply to other interim payments in the case of a lender who is a legal entity.
6. Requirements for notification of the use of the protection period
Notification of the intention to use the protection period must be given in writing or by any other means specified by the lender for the purposes of this notification. The creditor shall designate at least one easily accessible method of notification according to the first sentence using means of distance communication; unless it determines or makes such a method available to the creditor, the notification may be made by any means in which the creditor has a record that the notification to the creditor has occurred.
The notification shall indicate the creditor, a statement that the creditor intends to use the protection period due to the negative economic impact of the COVID-19 pandemic on the creditor, and an indication of the credit to which the notification relates. If the notification does not contain a credit designation, the notification applies to all loans between the lender and the lender.
If the Lender complies with the requirements without undue delay after the Lender has been notified, it shall acknowledge receipt of the Lender in writing or on another durable medium and its acceptance and within 30 days from the date of the Lender's notification to the Lender in writing or on another durable medium. the date of the beginning and end of the protection period and information on the amount, number and frequency of payments to be made by the creditor after the end of the protection period and the total amount to be paid by the creditor . Failure by the creditor to acknowledge receipt of the notification shall not affect the running of the protection period.
If the notification does not meet the requirements of the Act, the lender shall, without undue delay after the notification to the lender has taken place, call on the lender in writing or on another permanent data carrier to eliminate the defects of this notification.
7. Prohibition of certain payments, agreement on deferral of debt, prohibition of the creditor to dispose of the property during the protection period
The arrangement for payment for acts connected with the use of the protection period is not taken into account .
From the first day of the first calendar month following the date of entry into force of this Act until 31 October 2020, the lender shall not have the right to payments agreed or determined in the event of default of the lender with the performance of monetary debts arising from the loan agreement; this does not apply to the default of the creditor, who is a legal entity.
The debit settlement agreement concluded between the creditor and the creditor between 12 March 2020 and the creditor due to the negative economic impact of the COVID-19 pandemic on the creditor loses the legal effect of the monetary debt due during or after the protection period on the first day of the protection period; the legal effects of such an agreement relating to a monetary debt due before the beginning of the protection period shall remain unaffected.
If the creditor, who is a legal entity, notifies the creditor that he intends to use the protection period, the creditor is obliged to refrain from handling during the protection period assets that could serve to satisfy the creditor if there should be significant changes in the composition, the use or designation of these assets or a negligible reduction thereof.
The above information is basic as regards Act No. 177/2020 Coll. on certain loan repayment measures in connection with the COVID-19 pandemic. The full wording of the law can be found in the section COVID-19 legislation (as of 20.4.2020).