Czech Consumer Credit

Czech Republic

The Czech Republic has adopted new legislation concerning the provision and conditions of consumer credits. The legislation (the Czech Consumer Credit Act No. 321/2001 Coll.) is effective from 1 January 2002 and is based on the Directive of the Council of European Communities No. 87/102/EEC on harmonisation of the laws and additional legislation of member states in respect of consumer credit, as amended.

The Act defines what is consumer credit and also defines substantial information that must be contained in an agreement on the provision of consumer credit.

A creditor providing consumer credit must stipulate, among other requirements, the so-called "annual percentage charge concerning the expenses connected with provision of consumer credit" (RPSN). The RPSN must be calculated in accordance with the formula provided under the law and must be published by the creditor. The RPSN may only be changed if an agreement on the provision of a consumer credit provides for it and also provides for the conditions on the basis of which RPSN can be changed and the creditor informs the consumer about it.

The Czech Consumer Credit Act provides for the right of the consumer to repay an amount of provided consumer credit prior to the agreed payment date and in case he/she repays the provided credit prior to such date he/she is entitled to have the fees and the interest paid in connection with the provided credit discounted proportionately.

Besides the calculation and level of the RPSN and early repayment right, consumer credit agreements must also provide:

  • the maximum amount of provided credit, stipulation of the amount of instalments, the number of instalments and a time schedule for the payment of instalments,
  • stipulation of the amount of the fees charged by a creditor in connection with the provision of a credit, if it is not possible to stipulate a formula on the basis of which such fees would be calculated,
  • conditions on the basis of which an agreement can be terminated prior to the agreed term, and
  • the method of repayment of the credit, etc.

More importantly the Act provides that if an agreement on the provision of consumer credit does not contain all the prescribed information and conditions, such credit would still be considered to be consumer credit and a creditor would only be entitled to charge interest equal to the official interest rate as announced by the Czech National Bank at the time of the conclusion of the agreement on the provision of consumer credit.

The state supervision concerning adherence to the Czech Consumer Credit Act shall be exercised by the Czech Trade Inspection (Ceska obchodni inspekce) which is entitled to impose sanctions, including financial penalties against those providers of consumer credit who do not comply with the terms of the new legislation.

For further information please contact Michal Smrek at michal.smrek@cms-cmck.com or on +420 2 21098000.