Turkey: The Installment Sales

The Regulation About Installment Sales ("The Regulation") entered into force by being published in the Official Gazette on 14th January 2015. Although the title is 'installment sales'; the main subject of the Regulation is financial leasing agreements. It is important to be careful not to confuse the installment sales with the prepaid sales. In prepaid sales the buyer have the possession of the sold movable property after completing the payment. However in installment sales the buyer gets the property immediately and then makes the payment. Moreover the sales made by credit cards are not the subject of this Regulation.

The installment sale agreement must be in writing and one of the parties must be a consumer to apply this Regulation. The requirement of written form is not the only condition for validity. The seller must psychically deliver the agreement to the consumer or provide a copy on a permanent data storage including sending the agreement via e-mail.

The information below must be included in the installment sale agreements;

  1. The name, surname, contact information of the consumer,
  2. The seller's, the provider's or lessor's name, title, address, phone and other contact information, if any,
  3. The date of the agreement,
  4. The date of delivery of the goods or execution of the services,
  5. The goods and services which are the subject of the agreement,
  6. The cash price of the goods and service including the taxes in Turkish Liras,
  7. The installment sale price of the goods and service including the taxes in Turkish Liras,
  8. The right of withdrawal of the consumer, how and when to use it,
  9. The payment plan,
  10. The information about the right of early payment of the consumer, and if applied, the right of discount for the interest and commission. In case of an early payment the interests and commissions due after the early payment date shall not be paid.
  11. The interest amount, annual rate of interest (interest rate of contract to apply because the installment sale) and default interest rate which is not to exceed more than thirty per cent of the interest rate of the contract,
  12. The default of the consumer and its legal consequences,
  13. The information that, the consumer has the right of apply to arbitration committee for consumer problems and consumer court, in case of dispute.

If the agreement provides the transfer of the ownership at the end of the payments, the agreement must include also;

  1. The conditions to transfer of the possession of the goods,
  2. The conditions to transfer of the ownership of the goods if the transfer will be not be immediately made,
  3. The terms and conditions of transferring the payment liability to a third party, if it is specified in the agreement,
  4. Information on insurance liabilities, if it is specified in the agreement.

The right of withdrawal is one of the important points of the installment sale. The consumer can withdraw from the agreement within 7 days. This 7 - day begins on the date of signing the agreement for the services and on the delivery for the goods. The consumer can also use this right before delivery for the goods. If there is an agreement with a mix of sale of goods and services, withdrawal right terms for goods shall apply. The consumer cannot use his withdrawal right if the execution of the services starts within withdrawal right term with the approval of the consumer. The consumers who apply directly to the seller do not have a withdrawal right.

Upon exercise of withdrawal right, the seller shall refund the payment made by the consumer and return other documents if any, and the consumer shall return the goods within 7 days.

If the consumer is in default, the seller can demand the rest of the payment under two circumstances:

  1. If the consumer defaults in making the payment of two consecutive installments and the total amount of such two installments is equal to or more than 10% of the total of the remaining installments

or

  1. If the consumer defaults in making the payment of one installment and such unpaid installment amount is equal to or more than 25% of the total of the remaining installments

In order the seller to be entitled to demand the remaining installments to be paid at once, such right as stipulated herein shall be written in the agreement. The seller must give 30 days to the buyer for the payment of defaulted amount before the seller uses the right to demand the remaining installments. The interest and the commissions that would have applied if the buyer were not in default shall be deducted while calculating remaining the total installment amount.

The seller can demand negotiable instruments such as checks and promissory notes as a security for the total amount, but such negotiable instruments shall be separately issued for every installment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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