A case on customer credit agreement provisions has been initiated
The First Panel of the Constitutional Court initiated a case “On Compliance of Section 30 of 25 August 2008 Cabinet of Ministers Regulation No. 692 “Regulations Regarding Customer Credit Agreements” with Article 64 and Article 105 of the Satversme of the Republic of Latvia”.
Article 64 of the Satversme provides that the Saeima, and also the people, have the right to legislate, in accordance with the procedures, and to the extent, provided for by this Constitution, whilst Article 105 ensures the right to own property.
The Contested Norm provides: “The grantor of the credit does not have the right to request compensation for the fulfilment of credit obligations before the set time period. If the consumer shall utilise the right to fulfil the credit obligations prior to the determined set period and carries out recreditation with another grantor of credit, only substantiated and reasonable costs may be requested for the costs of administrative expenses, if such should occur.”
The applicant, the Administrative Regional Court indicates in its application that the contested norm has been adopted in accordance with the Consumer Right Protection Law, wherein it is indicated that a consumer shall have the right to settle his or her liabilities before the date established in the consumer credit agreement, and in this case a consumer shall have the right to a fair reduction of total credit expenses. However, the Court maintains that the law does not authorize the Cabinet of Ministers to reduce, by means of a Cabinet regulation, the fair costs only to administrative expenses. In the result of this property right of a credit institution are being restricted. A credit institution finances credits granted by it by loaning resources necessary for this purpose in an interbank market. If a credit is paid before the term, a credit institution might undergo losses.
The Cabinet of Ministers was asked to provide, before 1 September 2010, a reply on factual circumstances of the case and legal justification thereof. The term of preparation of the case is 1 December 2010.
Linked case: 2010-49-03