Pay attention to the cost of loan instalment deferral! Recommendations from ABDRC

Description: Payment deferral for the loans taken before 30 March 2020 is possible this year, too. So far, approximately 560,000 debtors have benefited of legislative and private moratoria, accounting for 14.7% of the total loans extended by the banking sector. And because instalment payment deferral can have a lot of consequences which could also have side effects for consumers, the Alternative Banking Dispute Resolution Centre (ABDRC) issues a number of recommendations for them. More information is available in the enclosed release, and accessing this explanatory link: https://www.youtube.com/watch?v=sXWPyKxRKMY&feature=youtu.be

1. The decision to defer instalments should be a well-informed decision;
2. During the deferral period, instalments are not written off. These are not even “frozen”, but only add to the payment effort after the expiry of this deferral period. According to the banking comparator tool available on FinZoom.ro, the mortgage loan instalments will by higher by up to 13%, whereas for personal loans these are expected to increase by approximately 6%;
3. A consumer applying for instalment deferral needs to meet a number of conditions: not to have any “past due” instalments; to submit an application with the bank before 15 March 2021; to prove an income reduction caused by the pandemic; and, very important, instalment deferral should not be aggregately longer than 9 months in both 2020 and 2021. In other words, if they already benefited of a 9-month instalment deferral in 2020, the consumer cannot apply for another deferral;
4. When the financial problems of consumers persist even after a 9-month instalment deferral, or a consumer considers, even during the deferral period, that it would be impossible for them to pay the new instalments, we urge them to approach ABDRC forthwith to apply for a negotiation of other clauses of their contract with the bank (interest rates, fees, principal, currency, etc.) so as to avoid the risk of defaulting and the consequent penalties charged by the credit institution;
5. Instalment deferral is only a temporary solution for the financial problems, while a negotiation with the bank/NBFI via ABDRC offers the possibility of a case-by-case solution that can have a positive effect throughout the entire term of the loan, or for the entire loan amount.

ABDRC’s recommendations and FinZoom.ro calculation can be consulted in the enclosed video:

Alexandru Păunescu, President of ABDRC Steering Board

It is obvious that the availability of legal and/or conventional moratoria is a benefit for the consumers that were forced into it by either the job loss, or the income reduction. We have already been approached by consumers not happy with how their loan interest is calculated after instalment deferral. In this context, we strongly advise them to make fully-informed decisions precisely not to give rise to disputes in the future. Payment deferral does not mean either that instalments are written-off from the payment schedule they agreed upon with the banks, or that payment thereof is frozen, because new costs are added after the 9-month period. Payment deferral treats only the symptoms, and provides consumers with a temporary solution for their problems. But, in ABDRC, consumers can have their problems solved for the entire loan repayment term. Moreover, the alternative resolution process is completely free of charge for consumers.

Irina Chițu, Manager of FinZoom.ro Banking Comparator

Consumers need to bear in mind that, when they suspend loan payment, they will pay higher instalments for their loan after the suspension period: by 6% for a personal loan for 5 years, and by 13% for a mortgage loan for the next 5 years. This means that, for the 9-month suspension, one pays three additional instalments for a personal loan, or six additional instalments for a mortgage loan just for having turned to this facility. Fortunately, there are better solutions than instalment deferral in place. In the very aftermath of the pandemic outbreak, banks offered their debtors better facilities than what the Ordinance provides: they did not apply interest during the suspension period, or were sensitive to the personal situations of the debtors. This is why I urge consumers to ask the bank or the Alternative Banking Dispute Resolution Centre (ABDRC) for a customized solution that can be reached by negotiation and dialogue.

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).