Rules for Provision of Consumer Loans in Ukraine Changed

On 16 October 2011 the Law of Ukraine "On Making Amendments to Certain Laws of Ukraine Regarding Regulation of Relations between Creditors and Consumers of Financial Services" dated 22 September 2011 (the "Law") entered into force. The Law introduced, inter alia, the following main changes in activity of Ukrainian banks and financial institutions: From 16 October 2011 it is prohibited to give consumer loans to private individuals in Ukraine in any other currency except for Ukrainian Hryvnia. Under loan agreements concluded after 16 October 2011, lenders may charge fees, commissions, interests and other payments only for those actions which are regarded as services according to the Law of Ukraine "On Protection of Consumer Rights", dated 12 May 1991, as amended. Furthermore, lenders are prohibited from charging any fees for early repayment of a consumer loan and are not allowed to refuse accepting such early repayment. A lender is prohibited to accelerate a consumer loan repayment unless the borrower is in default at least one calendar month and three months for a mortgage loan. The Law stipulates procedure for using fixed and floating interest rates in loan agreements, including, the rules for calculation of floating interest rate, requirements to index of such calculations and mandatory determination of maximum increase of the floating interest rate in a loan agreement. A lender shall notify a borrower of the transfer of the lender's rights of claim under the consumer loan agreement to a third party. Also, the Law clarifies that a bank is allowed to disclose information which constitutes banking secrecy in case of assignment of the bank's rights of claim under agreements with its clients.

The Law also introduced certain changes to the loan restructuring, security enforcement and insolvency procedures, as well as to the identification and liability of borrowers' legal successors.

For further information please contact
Armen Khachaturyan
, Senior Partner
or Yevgen Porada, Associate.

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