17 July 2014 – The recent amendment to the Civil Code, No. 106/2014 Coll., which entered into force on June 1, 2014, aims at tightening the rules on consumer protection in several aspects. The amendment deals with matters that foreign investors are often faced with while doing business in Slovakia. Notably, it sets out new requirements regarding the font size in consumer contracts. Font size in consumer contracts The rules that specify the minimum font size in consumer contracts, general terms and conditions or any other documents related to consumer contracts, will enter into force on January 1, 2015. The font size height in these types of documents will be required to be at least 1.9 millimeter. Any consumer contracts not meeting this requirement will be deemed null and void. All business entities that conclude agreements with consumers are thus required to modify their forms and documents so that they comply with this newly-introduced rule. Limitation of interest rates in consumer credit agreements A common problem perceived in Slovakia is the fact that loans granted by non-banking entities to consumers are provided at an interest rate that is often considered usurious. The amendment to the Civil Code thus attempts to limit operations of companies that aim to take advantage of their clients’ unfavorable financial situation. Since there was no consensus among the lay or professional public as to what interest rate should be considered usurious (and therefore illegal), the amendment to the Civil Code has introduced the definition of usury as taking advantage of someone’s state of distress, inexperience, mental maturity, excitement, credulity, recklessness, financial dependence or inability to fulfill commitments to a third party. The amendment also stipulates that the remuneration for the provision of a consumer credit may not exceed the maximum permissible rate, which has been set in a regulation issued by the Slovak government. Use of usury renders any credit agreement null and void. The amendment further stipulates that consumer credits can be granted only in a non-cash form. This means, according to some critics, that access to credit will get complicated for many people, since the data of the National Bank of Slovakia show that up to 100,000 of Slovak households do not have a bank account. Restriction of possibility of debt enforcement against consumers The amendment has introduced several changes to the Debt Enforcement Code. The purpose of these changes is to protect consumers against losing their home, in which they have their permanent or temporary residence, due to relatively small debts. Therefore, it is no longer possible to commence debt enforcement proceedings over the debtor’s real estate assets if the debt does not exceed EUR 2,000. Another change introduced by the amendment will allow the Debt Enforcement Officer to freeze the balance of the debtor’s bank account only up to the amount of the outstanding debt (the former legislation allowed to freeze the entire balance of the debtor’s bank account, irrespective of the actual amount of the outstanding debt). Further changes make it impossible to open debt enforcement proceedings over vehicles used by persons with severe health disabilities or vehicles used for business purposes. Further, the creditor must inform the debtor within 15 days that the debtor is late with the payment of a debt installment.
Stefan Artner is a partner in the Slovak law firm Marek & Partners. He specializes in corporate, commercial and civil law, real estate and litigation. He has been involved in several corporate reorganizations. He has also participated in various due diligence exercises connected with corporate transactions and carried out property title checks in connection with retail park projects. He has experience in advising on merger control issues and representing foreign companies in merger control notifications before the Antimonopoly Office of the Slovak Republic. He has also provided legal advice on employment and labor law issues and cross-border insolvency matters.