Turkey: How Rules Of The Game Are Changed On Consumer Loans?

Last Updated: 22 January 2016
Article by İzzet Gürler

Consumer Loan Agreements are regulated under Articles 22 -31 of the Consumer Protection Law numbered 6502 and entered into force on 28.05.2014 ("Law No.6502"). Amendments and new legislations regarding to Consumer Loans different from Consumer Protection Law numbered 4077 ("Law No. 4077") are as follows;

1. Scope of Consumer Loans is extended. Consumer Loans are defined in the Law No. 6502 as "loan agreement is the one under which the loan provider guarantees the consumer to postpone the payment, grants loans or undertakes to grant loans through borrowing or similar financing methods in return for interest and similar benefits." According to the new definition, overdraft accounts, debt structuring in return for interest are also included in the Consumer Loans.

2. Postponement of credit card payments for more than three months. According to Article 22/2 of the Law No. 6502, credit card agreement shall be considered as a consumer loan agreement if the payment is postponed for a period of more than three months or a similar installment payment option is provided to the consumer.

3. Obligation to inform:According to Article 23 of the Law No. 6502, loan provider should inform the consumer about the conditions of the consumer loan agreement within a reasonable time prior to the signing of the contract.

4. Right of withdrawal: Consumer may enjoy the right of withdrawal without any just cause and penalty in case consumer;

  • Notifies loan provider about enjoying the right of withdrawal within fourteen days following the signing of the contract and,
  • Repays the capital loan amount and contractual interest accrued from the loan agreement's execution date to the date of repayment of capital loan amount within thirty days following the notification of enjoying the right of withdrawal.

This provision is about enjoying the right of withdrawal from Consumer Loans Agreement, conditions of enjoying the right of withdrawal from the purchased goods or services are mentioned in Article 30/3. Moreover, loan provider should inform and is under burden of proof that Consumer is informed about the right of withdrawal.

5. Interest and making amendments on consumer loan agreement: According to Article 25/2 of the Law No. 6502, in case any of contractual interest, effective interest rate or total cost of the loan is not stipulated in the agreement, the loan will be used without any interest until the end of the agreement term. By this article, the rule in the Law No. 4077 stating that "in case any of contractual interest, effective interest rate or total cost of the loan is not stipulated in the agreement, legal interest rate in the Law numbered 3095 is implemented" has been repealed. Moreover, the terms of a fixed-term agreement, including the interest rate, cannot be subsequently changed to the detriment of consumers. In case of change on interest rate of an open-ended credit loan agreement, loan provider should notify consumer thirty days prior to the execution of the change and inform consumer about the future payments. The change of interest rate should be executed with prospective effect. The change of interest rate shall not be executed in case that customer pays all loans and closes the loan account within sixty days following the notification. The article of the Law No.4077 stating that contractual interest should not be more than 30% of the capital loan is not included to the Law No.6502. According to Article 120 of the LawNo.6098, default interest must be less than 100% of the legal interest at the date of interest debt is accrued and default interest should be calculated without abuse of rights.

6. Compound Interest Prohibition: According to Article 4/7 of the Law No.6502compound interest is prohibited to be applied in consumer loan agreements, including default interest. Compound interest basically means interest calculated on the initial principal and also on the accumulated interest of previous periods of loan. Default and overdue interests shall not be calculated through the compound amount. Moreover, calculation of default/ overdue interest through the loan added the default/ overdue interest is prohibited.

7. Default and Maturity: In Article 28 of the Law No.6502, default of consumer is formed corresponding with fixed-term credit loans under Law No.4077. The only difference is that, the creditor has to give at least thirty days prior notice of acceleration instead of one week. Within this scope, as a result of the consumer being defaulted at least on two consecutive installments, the remaining installments shall become due after having deducted the interest and other expenses related to undue installments., only if loan provider;

  • has performed all its obligations and
  • has given thirty days of notice and
  • the agreement includes article regarding to right to demand of all other installments not yet due and payable.

It should be noted that, the article regarding to default is only for fixed-term credit loan agreements. Credit card agreement shall be considered as an open ended consumer loan agreement if it fulfills the conditions stated in Article 22/2. Thus, the article regarding to default is not applicable for credit card agreements.

8. Account and credit card maintenance fee: In case a bank account is opened in relation to a fixed-term loan agreement and merely loan related transactions are executed on that account, no fee or expense under any name whatsoever can be requested from consumers in connection with that account. According to the decision numbered 2008/6088 on the date of 02.05.2008 of Turkish Court of Appeals for the 13rd Circuit, Article 31/2 of the Law No.6502 clarifies maintenance fee for accounts and credit cards. Banks shall offer at least one credit card to consumers without charging an annual membership fee or any fee under a similar name. Also, credit card agreements should be written at least 12 point size and bold.

9. Insurance: Insurance for the loan shall not be executed without the consent of the consumer given in writing or in an electronic environment. In case consumers wish to have an insurance policy, they may take it out with the insurance company that they prefer and the housing finance agency must agree with it.

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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İzzet Gürler
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