The mission of the Consumer Rights Protection Division is to promote the financial stability and transparency of the financial sector, as well as to increase public confidence in the financial sector. The Division strives to maximize consumer protection and transparency of information about financial products in the market, which in turn helps the active use of new financial products by the consumer, as well as reduce risks associated with them. To accomplish this goal, Regulation on Consumer Rights Protection in Rendering Servies by Financial Institutions, was approved to replace the procedures used previously. In addition to securing the enforcement of this regulation, one of the functions of the department is to receive, review and respond to client complaints in accordance with the legislation in force in Georgia.
The standards set under this regulation are binding for all commercial banks, microfinance institutions, non-bank depository institutions – credit unions and lending entities licensed and operating in Georgia.
This Regulation sets the standard for how the information should be provided by the financial institution to the client, as well as to the guarantor and the owner of the collateral before concluding the contract, when concluding the contract, including, remotely, and afterwards. The Regulation sets the form of the contract, the requirements for advertising and offers, and describes the processes and procedures for receiving and registering client complaints. The Regulation sets a maximum fee for certain cases and for some services, including the issuance of an excerpt, inactive products, advance repayment of the loan. In addition, this Regulation obliges the financial institutions to follow the recognized standards of ethics and business relations in dealing with consumers and to develop a code of ethics for the purposes of the loan process.
Certain requirements of the Regulation apply to any services and products provided by financial institutions. The standards related to the conclusion of contracts and contractual relations refer to loans and deposits in the amount of up to GEL 1,000,000 (one million) foreign currency equivalent.
The Civil Code of Georgia defines the grounds for invalidity of the contract. Violation of the requirements of the Regulation approved under the Decree of the Governor of the National Bank of Georgia №32/04 of March 9, 2021 cannot be a ground for invalidity of the contract concluded between the financial institution and the client, unless the same fact meets the criteria for invalidity of the contract envisaged under the Civil Code of Georgia.
The Regulation came into force on April 1, 2021. Certain requirements, such as, for example, deadlines for informing the consumers, the form and frequency of providing documents requested by the consumers and so on, also apply to contracts concluded before the enactment of the Regulation. However, a number of requirements are covered under the Regulation in force before April 1, 2021. In case of a change in the terms of the contract concluded before April 1, 2021, when the contract on amendments is concluded at the same time, the requirements of the new Regulation apply.
Yes, both Article 11 of the current Regulation and Article 9 of the Regulation in force until before April 1, 2021 define the circumstances when a financial institution has no right to charge a client an early repayment fee/penalty.
The maximum amount of the early repayment fee of the loan is determined by the Civil Code of Georgia and it is 2% of the remaining principal amount. However, within the scope of the above procedure, the maximum amount of the early repayment fee depends on the type of loan interest rate (fixed, variable, indexed) and the term remaining from the moment of early repayment until the loan maturity. If, for instance, the remaining term of the loan at the time of early repayment is 25 months, the maximum amount of the early repayment fee should not exceed 1% of the principal amount remaining at the time of such early repayment (see more information on the amount of commissions at the following link.)
However, for contracts concluded before April 1, 2021 and not amended, the maximum amount of the early repayment fee depends on the term remaining from the moment of early repayment until the loan maturity. For example, if the loan is issued in May 2018 and it is early-repaid in September 2021, and according to the schedule the remaining term of the loan is 10 months, the maximum amount of the early repayment fee at the time of such early repayment should not exceed 0.5% of the remaining principal amount. More information on early repayment commissions for contracts entered into before April 1, 2021 is available at the following link.
If the purpose of a Lari loan taken by an individual in a commercial bank is to refinance a loan in a foreign currency with the same or another commercial bank (i.e. conversion of the person's loan into Lari), the commercial bank is prohibited from charging the individual an early repayment fee.
Whenever a client expresses a will to repay a loan early in any form and in any service channel (both at the branch and in the remote channel, subject to establishing their identity in due manner), even when mentioned verbally, whatever confirms the will of the client, provided there are sufficient funds in the client's account, the financial institution is obliged to formalize the early repayment the loan on the same day. If the repayment of the loan for a technical or other reason requires a certain period of time, the organization can use it, but no interest should be accrued over that period. It is also important that if the loan amount exceeds Lari 2,000,000 (two million), the financial institution may require a 14-day advance notification before the repayment; however, this should be stated in the agreement between the parties.
The effective interest rate is the annual interest rate stipulated in the loan or deposit agreement that incorporates all the necessary financial expenses, and the period when the client pays these expenses. Accordingly, it reflects the real interest rate that the client pays/receives when using products. Comparing effective interest rates gives clients a good choice between different offers (effective interest rate calculator is available on this link.
If the client wants to repay the amount that exceeds the loan monthly instalment early in full/in part, what they do other than depositing the amount to the account for that purpose, is that they declare about their intention. Only after that the commercial bank is obliged to formalize the early repayment of the loan principal in full/in part. On the other hand, other financial institutions (microfinance institutions and lending entities), seeing that the amount deposited to the account by the client exceeds the instalment specified in the schedule, uses the difference to reduce the principal amount regardless of whether the client declares an intention to do so.
Financial expense is the necessary cost to be incurred by the client for using the loan/ deposit product, for example: interest expense/instalments, fees set by the financial institution for their service, compulsory insurance cost, property appraisal cost, notary cost, etc.
The expenses that the client should have already paid, regardless of whether they would have taken the loan, are not included in the financial expenses and are not considered in the calculation of the effective interest rate. For example, the cost of renewing an expired ID card is not considered a financial expense, as this is not directly related to the loan.
When concluding an agreement, a financial institution is obliged to agree with a client as to how they will inform the client about the changes in the index: through which channel and how often. Accordingly, in the event that the index indicated in the agreement between the client and the financial institution changes, the financial institution must notify the client in the form specified in the same agreement.
The Cover of the contract is an integral part of the contract that precedes all other parts of the contract. The information in it represents the important terms of the contract and includes nominal and effective interest rates, financial expenses linked to using the product, the amount of fines and other important contract information. The Cover also indicates how the client can file a complaint in case of dissatisfaction. It helps clients understand the most important information about the proposed terms and to make the right decision regarding the use of the loan/deposit product, as it summarizes the terms of the contract in a clear and comprehensible language
Whenever a client’s liability is overdue, the financial institution is obliged to notify the client, as well as the co-borrower, and/or guarantors and/or joint and several guarantors immediately, as practicable, but not later than 5 work days. The financial institution is not liable for the failure to meet this commitment, the client and/or guarantor and/or joint and several guarantors are not reachable as their contact information has changed and the financial institution is not aware of it.
The financial institution is obliged, at the request of the client, to provide them with a sample contract in physical or electronic form that will fully indicate all the articles of the contract and the previously known parameters. After the client applies for a specific financial product, they can receive a sample contract indicating the specific terms to be offered.
The financial institution is obliged to stop charging for non-performing financial products, unless the client uses other active non-loan/deposit products. A product that the client has not used for the last 12 months is considered inactive, except for loan products, as well as current and deposit accounts with a positive balance.
According to the legislation of Georgia, in case more than one immovable or movable item is used to secure one liability, and the client fails to meet or improperly meets their liability, the creditor is entitled to determine the order of their sale based on the volume of the liability, the value of the pledged or mortgaged item, or other interests.
The currency exchange bureau is obliged to provide the customer with complete information about the exchange rate, service fee and notable exchange rate (if any). The currency exchange bureau must also provide information on the service fee and the notable exchange rate (if any) in a place visible to the client (at the cash desk and on the currency exchange board) in font size pertinent to the exchange rate. Also, if the customer applies to the currency exchange bureau within half an hour after the execution of the transaction with a request to cancel the transaction and submits the receipt of the transaction, the currency exchange bureau is obliged to cancel the transaction.
If a client is offered a loan or deposit by an intermediary (instead of a financial institution) who is not an employee of the bank, the obligation to provide the information specified in the regulation on consumer protection is incumbent on the same intermediary.
The requirement for risk insurance depends on the decision of the financial institution and is not required by this legislation. For example, if a financial institution requires a borrower to acquire life insurance for a loan, this is a condition established by the financial institution and does not constitute a statutory requirement.
If a financial institution requests and/or offers risk insurance to a customer for a specific financial product, they are required to offer the customer alternative insurance products of at least three different insurance companies. A financial institution should provide information on the terms of each insurance product, and give a client the so-called information sheet that contains all the important terms and conditions related to insurance.
Yes, the customer is entitled to present insurance policy from the insurance company of their choice. The financial institution must provide the client with the conditions and criteria that the insurance policy submitted by the customer must meet, and if the policy submitted by the customer is not acceptable to the financial institution, it must justify the reason for the refusal in writing.
A financial institution is prohibited from unilaterally amending a specific financial product contract and/ or seeking consent in advance, if the change:
a) relates to the currency of the product;
b) is necessary because at the time of loan disbursement, the financial institution incorrectly assessed the customer's solvency, and this is not because the client intentionally provided incorrect or incomplete data;
c) is due to higher inflation, economic decline and/or changes in market interest rates by no more than 5 percentage points.
The Regulation on Consumer Rights Protection in Rendering Servies by Financial Institutions defines three types of interest rates: fixed, variable and indexed. Financial institutions are required to indicate the appropriate type of interest rate in the loan and deposit agreements of up to Lari 1,000,000 (one million) or foreign currency equivalent.
Changes in the price of a fixed interest rate loan or deposit during the term of the contract are not permitted unless caused by client’s action. A change in the price of a variable rate product is possible during the term of the contract, although this must be specified in the contract with reference to the circumstances required for that change. An indexed interest rate is a type of interest rate that is tied to a specific public index and changes based on the change in that index. Different types of early repayment fees are set for loans with different types of interest rates.
An indexed interest rate is a type of interest rate that is tied to a public index in a certain way and is changed according to the change in that index. A public index is a publicly available indicator, rate, or index over which a financial institution cannot have a significant impact. For example, the interest rate on a deposit or loan may be tied to the monetary policy rate, the London interbank rate, the price of oil or gold, and so on. However, if the index changes, the interest rate on the product will change by the same amount in accordance with the terms of the contract between the client and the financial institution. Also, when disbursing loans with indexed interest rate, financial institutions are obliged to duly inform consumers of the risks linked with the change in this index.
A general agreement is an agreement that allows concluding specific loan agreements within its scope and sets limits and terms for them. Also, if the loan is secured by a guarantor, and/or the borrower and the owner of the collateral are different persons, when issuing a new loan within the limit and term provided by the general agreement and/or when amending the loan agreement, additional consent of the guarantor and/or owner of the collateral is no longer required.
The financial institution is obliged to notify all the borrowers who are parties to the general agreement, the owner of the collateral and/or the guarantors/joint and several guarantors about the loan disbursement and/or changes in the loan agreement no later than 5 (five) work days after the loan is finalized, and in case the loan agreement is amended, no less than 5 (five) work days before doing so.
In case of more than one current overdue liability, when the amount on the client's account is not enough to cover more than one and/or all liabilities, the client has the right to choose the liability they want to repay in the first place. However, the choice must be made only if the above occurs; it is not admissible for it to be pre-determined in the loan agreement. Importantly, a financial institution can pre-agree with the client on a specific channel where the client would express such will. These requirements apply to loans of up to Lari 1,000,000 or equivalent in foreign currency only.
The liability must be repaid primarily from the currency account in which the payments are denominated (unless the borrower otherwise instructs financial institution prior to repayment). However, in repaying the current liability, it is not permissible for the financial institution to change the priority of the accounts and conversion unilaterally without the agreement of the client (no prior agreement is allowed).
The financial institution is obliged to make a record the liability being redeemed by the client based on the actual time the client deposits the amount on the account (before 24:00). If this is not possible due to technical or other reasons, the financial institution shall not impose any kind of financial sanction and/or commission on the period from the actual time of depositing the amount on the account until the respective record is made.
If the repayment date overlaps with a non-working day or a public holiday specified by law, the financial institution must accept payment on the next business day and, in such a case, it cannot impose a penalty for non-payment on weekends.
The freedom to set the terms of an agreement is established by the Civil Code of Georgia. Thus, entities of private law are free to conclude agreements in compliance with the law and determine the content of these agreements and, hence, the terms of the financial services are agreed between the parties. Within the scope of authority and competence defined by the Organic Law of Georgia on the National Bank of Georgia, the NBG is not authorized to request any financial institution to set preferential terms on loans, including restructuring/deferral. Accordingly, this decision is made by the financial organizations themselves.
Yes, it is possible for a financial institution to charge a fee if the information contained in the loan, deposit and current accounts is put on the official letterhead. However, in such a case, the client should be offered an alternative to receive this information for free.
If the client requests an information on the existence or absence of debt on an official letterhead, the financial institution may have a time limit for issuing such document in accordance with its internal policies/procedures. However, this information in the form of an excerpt should be issued immediately, within a technical arrangement.
Yes, Article 625 of the Civil Code of Georgia stipulates the maximum effective interest rate to be accrued on the loan, as well as the total amount of costs to be charged in case of fines and overdue payments.
Yes, if a client verbally expresses dissatisfaction or disagreement with an issue, the financial institution is obliged to offer the client a written claim. However, if the client makes a complaint in writing, by phone or electronically, the financial institution is obliged to get back to the client within one month and, where possible, inform them on the results of the investigation.
The issue of the statute of limitation on the claim is regulated by the Civil Code of Georgia. The NBG, within the powers and competence stipulated under the Organic Law, is not entitled to make any legal assessment. Accordingly, if a financial institution requests the fulfillment of an obligation that the consumer considers to be obsolete, the consumer should apply to the general courts of Georgia or the relevant dispute resolution authorities.