Latvian court rules sale of consumer loan portfolios only allowed to approved buyers
On January 28, 2021, the Administrative Affairs Department of the Senate of the Republic of Latvia (the âSenateâ) issued a decision in case SKA-68/2021.
The decision not only affects Latvian peer-to-peer market platforms, which use the assignment of receivables resulting from the agreements of consumer lenders with their clients (consumers) to investors, but also other credit institutions and possibly banks. debt collection companies.
The Senate supported the Consumer Rights Protection Center’s (the “Center”) interpretation of the idea, that although the investors (assignees) did not enter into credit agreements and did not issue funds directly to consumers, by applying Article 8, paragraph 1 of the Consumer Rights Act Protection Act in its essence and meaning, it can be concluded that the investor has provided specific loan services through the intermediary of the consumer lender.
Therefore, if the investor has legally acquired rights of claim against the consumer, the Senate recognizes that the investor should be regarded as the consumer lender himself. However, as the Senate and previous courts of first instance of Latvia have held, in accordance with Article 8, paragraph 11 of the Consumer Rights Protection Act, consumer loan services can be provided alone by an approved capital company. Since the claim of the principal against the consumer could be acquired on the platform and by any person, including a natural person and a legal person without corresponding authorization, the Senate supports the conclusion of the district courts, of so that the aforementioned law is bypassed.
The Senate recalls the objective of Directive 2008/48 / EC of the European Parliament and of the Council on consumer credit contracts and repealing Directive 87/102 / EEC (the âConsumer Credit Directiveâ), and l importance for the market to offer sufficient protection to consumers and to ensure consumer confidence. Thus, the free circulation of credit offers must be able to take place under optimal conditions both for those who offer credit and for those who need it.
By allowing consumers to be credited by third parties under assignment agreements without the corresponding license and due to the increase in the amount of credit granted to consumers, it is difficult if not impossible for the Center to monitor and apply consumer protection rules.
For the aforementioned reasons, the Senate agrees with the points raised in the decision of the tribunal de grande instance, concerning the risks that may arise if a person who does not have such a right in accordance with legal regulations substitutes for the consumer lender. If the consumer loan is granted by a person without a corresponding license or by a person who does not have to comply with the obligations imposed on the licensed company, the district court validly indicates that the rights of consumers may be compromised and as the consumer disadvantaged by Article 41 of the Consumer Credit Directive.
The Senate summarized all of the above as follows: Recital 15 of the Consumer Credit Directive, according to which Member States have the right to restrict the range of providers of consumer loan services, may also restrict the assignment conditions set out in Article 17 of the Consumer Credit Directive, subject to recital 41 of the Consumer Credit Directive. The consumer should not be at a disadvantage under the credit agreement. The transfer of the right of complaint may affect the rights of the consumer and disadvantage the consumer if the complaints are acquired by persons who do not comply with the requirements of regulatory texts, including Article 8, paragraph 1.1 of the protection of the rights of consumers. consumers law.
In view of all of the above, it would be welcome to provide a clear sense of the provision of credit services and the substance of the actual transactions of the investor (cedent) and whether they can be recognized as credit services. A closer look at the terms and conditions of the assignment and arrangement of the credit agreement to be managed by the original consumer lender, highlights the rights and obligations of each party, including risks and remedies. potentials.
The Senate’s conclusion on consumers to be credited by third parties under assignment agreements without the corresponding license and therefore on the increase in financial recourse for consumer lenders, highlights the inability to assess the risks and to focus on the facts, for example, whether, in substance, consumer rights are threatened and what are the practical difficulties of the Center in monitoring and enforcing consumer rights in this situation. Similarly, the question arises as to whether collection companies credit consumers in the context of the sale of non-performing portfolios of consumer lenders.
Thus, in terms of the protection of consumer rights, it has not been assessed whether the rights of consumers have been threatened and what is the impact of the Senate decision on other areas of activity where the assignment of loans consumption is used.
However, the European Parliament adopted Regulation (EU) 2020/1503 of the European Parliament and of the Council of October 7, 2020 on European providers of crowdfunding services for businesses, and amending Regulation (EU) 2017/1129 (” Regulation â) and Directive (EU) 2019/1937 Directive (EU) 2020/1504 of the European Parliament and of the Council of October 7, 2020 amending Directive 2014/65 / EU on markets in financial instruments, already in force, applicable from 10 November 2021 and binding in its entirety across the EU, will provide a new configuration for crowdfunding platforms in which to operate.