Consumer credit – loans, leases, instalments and credit cards
Loans, credit cards, leases and instalments are types of consumer credit. The rights and obligations of consumers are the same for small loans taken from a bank or a quick loan Office, and instalments acquired from a store.
Starting from July 2011, the principles of responsible lending are applicable to Estonia as well as to the rest of Europe. According to these principles, consumers should know the following, before taking a loan, instalment or lease or using a credit card:
- Payment obligation must correspond to the solvency of the customer. When assessing solvency, the consumer is obligated to give an honest overview of all of their incomes and already existing financial obligations to the creditor. The creditor’s task is to verify the solvency of the customer to confirm it;
- The customer must be able to make a well-thought-out decision and the creditor must provide them with as much information and time as needed;
- The consumer must be given the option to compare the offers made by different creditors. To facilitate the process, the creditor must give the consumer the consumer credit information sheet (the standard European consumer credit information sheet) together with the offer. The format of the information sheet is common throughout the European Union and all of the most important lending conditions such as the repayable amount, annual percentage rate of charge, fines for delay, other possible additional costs, options for withdrawing from the contract and early repayment are presented in it in tabular form;
- The customer must be able to acquaint themselves with the contract terms, if they so wish. For that reason, they have the right to ask for a copy of the draft contract from the creditor and get acquainted with it, before they make their final decision;
- The customer has the right of withdrawal from the customer credit contract (excluding loans secured with a mortgage) within 14 days of entering into the contract.
When the consumer runs into solvency problems, they have to act fast and find a solution. First, they have to turn to the creditor to change the payment schedule, take a grace period, combine all of the smaller obligations into one loan with a better interest or find some other appropriate solution. They may also ask for advice for further action from a debt advisor or the Consumer Protection Board.
If the consumer is already in a situation where fines for delay, interests or other costs have become extremely high, they have the option of asking a court to decrease the unreasonable accessory obligations. In court, the creditor has to explain the reason for filing a claim of such amount against the customer. The customer has an opportunity to explain and give evidence of why it is difficult for them to pay the fines for delay, interests and other costs of such large amount. The customer can also ask the court to go over the limitation period of the claim. The customer has the right to submit through a court:
- an objection to the limitation period of the claim;
- a claim to decrease fines for delay, interest and other costs;
- an allegation for claim nullity - for example, if the consumer did not have the opportunity to read all the terms and conditions of the contract upon entering into the contract or there were terms and conditions in the contract that were unreasonably harmful to the customer;
- a claim for decreasing procedure expenses and legal costs.
The most extreme solution in the case of solvency problems is declaring personal bankruptcy.