A judgment on customer credit agreement provisions has been adopted
The Constitutional Court has adopted a judgment in the case No. 2010-49-03 “On Compliance of Section 30 of 25 August 2008 Cabinet of Ministers Regulation No. 92 “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 the Satversme, whilst Article 105 ensures the right to own property.
The contested norm provided that the grantor of the credit does not have the right to request compensation for the fulfilment of credit obligations before the established time period. The norm also established that in such case the creditor shall have the right to request, form the customer, only substantiated and reasonable costs for covering administrative expenses, if such should occur. The contested norm lost its force on 6 January of this year. The effective regulatory framework are more advantageous for creditors, namely, they establish that the creditor shall have the right to receive a fair and objectively grounded compensation for possible expense directly incurred in relation to credit disbursement before established term. However, the amount of the compensation is limited.
The present case was initiated having regarding to an application of the Administrative District Court. The Court was reviewing an administrative case, wherein one of the parties was a credit institution, to which the contested norm applied. The Administrative District Court indicated that the contested norm has been adopted at variance with the authority granted by the Customer Rights Protection Law; moreover, it restricted the property right of a creditor in a non-proportional manner.
The Constitutional Court found that the aim of the contested norm is protection of customers as the weakest party to a credit agreement. The authority granted by the law includes the right to establish a fair reduction of common credit expenses in favour of a customer. Such authorization is clear enough, and the Cabinet of Ministers has not breached it; consequently, the contested norm does comply with Article 64 of the Satversme.
The Court established that the particular norm also complies with Article 105 of the Satversme because restriction of the property right of creditors is proportional. In case when a customer fulfils his or her credit liabilities before the term established in a credit agreement, the sum disbursed to the creditor can be invested into gaining profit. Depending on the terms of investments and market situation, the creditor can either gain profit, or undergo losses, namely, the creditor undertakes commercial risk.
The judgment of the Constitutional Court is final and not subject to appeal.
Linked case: 2010-49-03