It is common practice in Turkey for consumers to use card instalments to pay for goods and services. This has drawn criticism as consumers had the opportunity to overspend, leading to a high level of indebtedness. In order to tackle this issue, the Banking Regulation and Supervision Agency (the “BRSA”) previously introduced limitations on the maximum number of instalments for the purchase of different goods and services and restricted payment by instalment for others. For example, food products, alcoholic beverages, fuel, cosmetics, and office equipment cannot be paid for in instalments.
Payment by instalment
Effective from 15 August 2018, the BRSA has further tightened the limitations by amending the Regulation on Bank Cards and Credit Cards (the “Cards Regulation”). Accordingly:
(i) jewellery has been added to the list of goods which cannot be paid for in instalments;
(ii) the number of monthly instalments which can be used for the purchase of electronic goods (other than computers which can still be paid for in 6 monthly instalments) is decreased to 3 from 6; and
(iii) the number of monthly instalments which can be used for the purchase of services relating to air travel, travel agencies, transportation and accommodation and payments to clubs and associations is decreased to 6 from 9.
Maturity of consumer loans
On 15 August 2018, the BRSA also amended the Regulation on Loan Transactions of Banks (the “Loans Regulation”) to impose further restrictions on consumer loans. These restrictions shall enter into force on 1 September 2018.
In principle, the Loans Regulation classifies consumer loans under two different categories and each category is subject to different rules. The first category consists of loans given for the purpose of purchasing real estate, covering educational costs and financing debts owed to public institutions and organisations, while the second category includes all other consumer loans. Regarding the first category, the amendment to the Loans Regulation has not introduced any changes, and there continues to be no limit on maturity for such loans. However, the second category of consumer loans which previously could be paid over 48 months, is now restricted to a maximum maturity of 36 months. In addition, the amendment to the Loans Regulation introduces a restriction on loans that are given for the purpose of purchasing cell phones, tablets and computers. As per such restriction, these loans shall be subject to a maximum maturity of 6 months.
In the case of any restructuring of the aforementioned second category of consumer loans, the new restrictions shall also apply. However, temporary Article 3 of the Loans Regulation sets out an exception for previously extended consumer loans; provided the borrower applies within a year from 1 September 2018, they shall be able to restructure their outstanding debts for 48 months. This Article 3 exception does not apply in instances where the borrower is given the opportunity to benefit from a new facility in the context of the restructuring, and therefore the maturity shall be limited to no more than 36 months in accordance with the amendment to the Loans Regulation.