Enforcement: There is still room for negotiation even at the eleventh hour
- Sep 30, 2021
- In Press releases
ABDRC received more than 130 applications for negotiation with banks from consumers subject to enforcement proceedings. While the banks had already commenced proceedings to recover overdue amounts from customers, which prevents the parties to negotiate via ABDRC, in 5 different cases, they accepted to enter conciliation. All 5 cases were aimed at the bank accepting payment commitments, lifting garnishments, and suspending seizure of immovable properties, plus consumers bearing the enforcement costs.
29 September, Bucharest. In 2020 and 2021 together, the Alternative Banking Dispute Resolution Centre (ABDRC) received more than 130 applications for negotiation with banks from consumers subject to enforcement proceedings. While the banks had already commenced proceedings to recover overdue amounts from customers, which prevents the parties to negotiate via ABDRC, in 5 different cases, they accepted to enter conciliation.
All 5 cases were aimed at the bank accepting payment commitments, lifting garnishments, and suspending seizure of immovable properties, plus consumers bearing the enforcement costs.
“These very few exceptions of banks entering talks with consumers, despite the first having already commenced enforcement proceedings, show us that amicable conciliation solutions could be found between the parties even at the eleventh hour. Still, consumers needs to be aware that it is very difficult to convince a bank to accept negotiation and conciliation per se when they had already commenced enforcement proceedings. Involvement of a bailiff in the relation between the bank and the consumer is an additional reason. Thus, the payment commitments are first proposed to the bailiff, and then cleared by the bank. Additionally, there are also enforcement costs consumers need to consider, even if the steps taken via ABDRC are free of charge for them. We recommended the banks to act upon such negotiation applications, particularly when the enforcement proceedings have already been commenced. The important thing is to prevent the account garnishment or the sale of real properties. But, if it comes to garnishment, the parties should find a way to enter into a payment commitment. Banks might accept such amicable settlements for the consumer to resume an instalment payment schedule because these enforcement steps are time and resource consuming for the both parties to the dispute. ABDRC can help find debt rescheduling solutions, including cost reductions for justified health-related or social reasons, and even suspend the enforcement”, says Alexandru Păunescu, President of ABDRC Steering Board.
- Consumers should not fall behind on their loan instalments by more than 90 days because at the expiry of this term, the loan is accelerated and the bank may take steps to have its claim recovered.
- Consumers should initiate the dialogue with the bank or approach ABDRC before the 90-day period of non-payment expires.
- During the 90-day term, consumer should not avoid the bank’s attempts to contact them. After the three months of non-payment, the consumer may no longer repay their loan in instalments, but owes to the bank the entire outstanding amount. Moreover, the potential default interest charged during the 90-day period are significantly lower than any amounts that would be subsequently due.
- Consumer should pay increased attention to who are their creditors. Many times, the banks are not the creditors, even if they effectively garnish the accounts. When the bank does not have the capacity of creditor (but that of garnishee), but the consumers has accounts opened with that bank, the actions they take should not be in relation to the bank, but to the creditor that ordered the garnishment (the National Agency for Fiscal Administration, for instance). The bank is bound to institute/apply the account garnishment, otherwise it is obliged to pay the amount concerned to creditors from own funds.
- After the 90 days of payment delay, the claim can be sold by creditors to debt recovery companies, and this renders impossible any further settlement via ABDRC because negotiations assisted by the Centre may only be conducted with entities supervised, monitored and regulated/authorised by the National Bank of Romania.
- When the claim ends up with a court-appointed bailiff, the enforcement proceedings are commenced: the accounts and salaries shall be garnished, and/or the movable or immovable property shall be seized (depending on the property of the debtor and/or the collaterals lodged).
- The court-appointed bailiff shall charge consumers the costs of certain procedural steps, such as: collection of information about the pursuable property owned by the consumer; giving formal payment and other notices; sending of letters to banks to apply the garnishment; transport costs; the fee of the bailiff/lawyer/experts appointed in the case, etc.
- Instalment payment delay requires an increased payment effort: with enforcement, up to one third of the salary may be retained. Where there are more creditors, up to 50% of the income can be retained, whereas other amounts can be retained 100%.
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).