A Warning from ABDRC: Instalment Deferral Does Not Suffice for Many Consumers
- Mar 18, 2021
- In Press releases
Having reviewed the applications filed by consumers with ABDRC, we collected a number of problems these have already been facing, even after benefiting of instalment payment deferral over the maximum 9-month period. Moreover, these problems can worsen in the period to come. For this reason, banks should be prepared for many consumer defaults under the new repayment schedules, regardless of this instalment deferral relief. So far, ABDRC has received approximately 250 applications from consumers seeking, among other things, also instalment deferral due to the financial difficulties triggered by the pandemic. Many of them either did not fall under the scope of the applicable regulations (because of overdue debts or the expiry of the maximum 9-month term), or asked the banks for additional solutions to help them overcome their financial difficulties.
15 March, Bucharest. The time limit set under the legislative moratoria for consumers to file applications for deferral of their instalments for not more than 9 months expires today. Having reviewed the applications filed by consumers with the Alternative Banking Dispute Resolution Centre (ABDRC), we collected a number of problems these have already been facing, and that can only worsen in the period to come.
“If we are to anticipate what lays ahead after the period when consumers had the possibility apply for instalment deferral, we can say that the banks should be prepared for many consumer defaults under the new repayment schedules, regardless of this instalment deferral relief. Among the applications filed with ABDRC, we found also consumers asking the banks for instalment deferral beyond the maximum 9-month term, arguing that their financial standing has not improved. Others want to have instalment payment deferral suspended, having anticipated that the cost of this deferral would only worsen their future standing. So far, ABDRC has received approximately 250 applications from consumers seeking, among other things, also instalment deferral due to the financial difficulties triggered by the pandemic, as well as identification of additional solutions to help them overcome their financial difficulties, not just a simple instalment deferral. On the other hand, we still receive many applications for deregistration of consumers from the Credit Office (A/N 534 applications in 2020 and 112 in 2021), signalling that many consumers want to apply for new loans and do not see themselves affected by the pandemic. As we have already pointed out, these applications fall under the scope of a special piece of legislation, and the overwhelming majority thereof are closed further to the banks refusing to engage in such conciliation. Our advice to consumers, particularly on this World Consumer Rights Day, is to make thoroughly informed decisions whenever their personal finances are involved. We added a new page to our website where they can find simplified information about all the methods of applying for negotiation with the banks”, says Alexandru Păunescu, President of ABDRC Steering Board.
Benefit of negotiating with the bank when applying for instalment deferral
Even if instalment deferral could be obtained with a direct application filed with the bank, some consumers approached ABDRC and obtained additional benefits thanks to negotiation. There were also consumers who did not fall under the scope of the applicable regulations (because of overdue debts or the expiry of the maximum 9-month term), but these too found a solution with the help of the Centre’s conciliator. Here are some examples of cases resolved and consumer feedback:
- Vasile Tarnovietchi, Satu Mare
Last year, I benefited of a 9-month deferral, but I couldn’t get back on my feet because I fell into unemployment. Fortunately, Conciliator Camelia Popa managed to convince the bank to afford me a 10-month loan extension and a 6-month period of grace, during which my instalment would be of only RON 280. Additionally, my interest was reduced by 1.5 percentage points, and this takes my instalment down to RON 610 from RON 750 after the period of grace, until the end of the loan. I am very pleased, particularly because all went not fast, but very fast, in just a couple of days of discussions over the phone! The conciliator proposed virtually the best possible solution for me now.
- Nicu Marin, Brașov
I earn my income 100% from tourism, and I ended up not being able to pay my instalments due to the pandemic. I obtained a loan restructuring, and even if the loan repayment period extended, this helps me a lot because the instalment went down from RON 1,200 to RON 660. I am less interested in how much I would pay overall, and more concerned about solving my problem now and being able to cope with the instalment. I’ll come round later, and maybe I can make an early repayment. Conciliator Roxana Mustățea stayed in touch with the bank and found the solution very quickly. ABDRC is an excellent initiative, so much the more that they solved my problem well, fast and free of charge.
- Daniel Bălan, Brăila
I am very pleased even if I didn’t get all that I asked for. Conciliator Septimiu Stoica obtained a 12-month deferral of instalments, and the bank accepted to keep my instalment in the same amount as before deferral after this period. I had also asked for an interest reduction by 1-2 percentage points, but they didn’t agree. Fortunately, over the 12 months I only pay the interest, and the instalment is of RON 320; then, I come back to my old instalment of RON 1,000 per month. So, despite the longer repayment term, my instalment would not go up. I saw many people complaining about paying more after deferral, but for me, fortunately, I will still pay my old instalment. It went very fast. They emailed me the documents, and I signed them. I am very pleased.
Other specific cases resolved by conciliation
- M., Bucharest. After two months of deferral, the bank cancelled, further to the consumer’s request, the instalment payment deferral procedure. The instalment amount remained as before deferral.
- M., Brasov. Consumer fell into furlough. He/she used to pay a monthly instalment of RON 1,240 for a personal loan, but accrued delays of 200 days, and risked to be forcedly executed by the bank. Having approached ABDRC, he/she signed a 6-month payment commitment with the bank undertaking to pay at least RON 700/month. In the end of these 6 months, he/she would be able to restructure the loan, provided that he/she finds an eligible co-payer.
- G., Bucharest. In 2020, the family’s income reduced by approximately RON 5,000, further to the company both spouses were working for suspended its business. They apply for a 9-month deferral with the bank, but this was rejected due to the overdue debts they had to the bank. Further to the negotiations facilitated by ABDRC, the trader reduced the interest rate by two percentage points for both personal loans, and extended the loan term by 24 months. Restructuring shall cover also the overdue debts accrued under both agreements.
What do conciliator say after one year of instalment deferral
Camelia Popa, Conciliator
Looking back at the cases I helped resolve, I can say that, after this deferral period, loan restructuring measures should be taken urgently particularly for those consumers that have not overcome their financial difficulties after the nine months. Many are unemployed, and I believe that for approximately one year from now, we will see a flow of consumers applying for loan restructuring in order to have their monthly instalment reduced. Traders should prepare for such requests they can meet by removing certain fees or reducing the interest rate. Even if we would end up in a situation where consumers pay more interest in the end of the loan, many would go for it to obtain a lower monthly instalment. I noticed that many consumers failed to understand what instalment payment referral actually means, while others did not know what to ask the bank. Most likely, those who approached ABDRC and could receive explanations from the Centre’s conciliators had the most to gain.
Septimiu Stoica, Conciliator
It is interesting to see that some consumers, who had initially seen only the benefits of instalment deferral, reviewed their position having realized also the costs involved. This happened in one of the cases I worked on. I think that people kind of rushed in, particularly because the legislative procedure failed to provide also for the possibility that consumers reconsider their initial decision. Banks entered into a kind of inertia of clearing these applications, and consumers hoped to find an easy way out, but the outcome was even worse in some cases. Fortunately, ABDRC has proven useful again, particularly because we dealt with very specific situations that demanded for solutions that the lawmaker or the banks could have not anticipated. Maybe scenarios for such instances should be imagined, too and people should be advised thereof. However, in the end of the day, no one can foresee everything. This is precisely why the role of ABDRC, that has ability to react and find case-by-case solutions, is even more critical.
About ABDRC: ABDRC is an entity set up under a European Directive, and intermediates, free of charge and in not more than three months, negotiations between consumers and banks or NBFIs, for contracts/agreements in progress. Consumers from any county of the country may file applications with the Alternative Banking Dispute Resolution Centre (ABDRC) filling-in an online form directly on the website www.csalb.ro. When the bank accepts to enter the conciliation/negotiation procedure, a conciliator is appointed. ABDRC works with 19 conciliators, of the best specialists in law and with relevant experience also in the financial and banking field. Everything is settled amicably, and the understanding between the parties has the power of court judgment. More information about the work of the Centre is available by phone at 021 9414 (charged a normal rate).