On April 6, 2020, the methodological norms for the implementation of Government Emergency Ordinance no. 37/2020 were approved by Government Decision no. 270/2020. This ordinance concerns the provision of facilities for loans granted by credit institutions and non-banking financial institutions to certain categories of debtors. This was eagerly awaited by individuals and legal entities with ongoing credit or leasing contracts. The legislative act was adopted in response to the changing economic situation nationally due to the emergence of the COVID-19 coronavirus pandemic.
To assist interested parties, we provide relevant information regarding Government Emergency Ordinance no. 37/2020:
- What has been established by Government Emergency Ordinance no. 37/2020 for individuals with ongoing credit/leasing contracts due to the declaration of a state of emergency?
According to this legislative act published in the Official Gazette on March 30, 2020, the obligation to pay due installments related to loans, including principal, interest, and fees, granted by creditors to debtors until the entry into force of this emergency ordinance, can be suspended at the debtor’s request for up to 9 months but no later than December 31, 2020. Specifically, the suspension can be requested for a period ranging from 1 to 9 months, as requested by the debtor.
- Who benefits from this facility?
– Debtors who have entered into a credit/leasing contract for obtaining a credit that has not matured, and for which the creditor has not declared early maturity before the entry into force of this emergency ordinance.
– Debtors whose credits do not have arrears at the date of the declaration of the state of emergency in Romania or have paid these arrears by the date of requesting the suspension of the payment obligation resulting from the credit.
– For individual debtors for whom the extension of credit maturity exceeds the age limit provided by creditors for granting credits, creditors proceed to restructure credits within the age limit.
– Debtors whose incomes have been directly or indirectly affected by the serious situation generated by the COVID-19 pandemic, according to the implementation rules of this emergency ordinance, exclusively.
Additionally, the methodological norms specify which categories of loans are eligible for the suspension of payments:
– Loans granted until the entry into force of the provisions of Government Emergency Ordinance no. 37/2020, namely March 30, 2020, inclusive.
– The final due date of the repayment obligations, as provided in the credit contracts, is after the entry into force of the provisions of Government Emergency Ordinance no. 37/2020, namely March 30, 2020, inclusive.
– Early maturity has not been declared until March 30, 2020, inclusive.
– There are no overdue installments at the date of March 16, 2020, inclusive, or debtors have paid the overdue obligations by the date of requesting the suspension of the payment obligation, as provided in Article 2, paragraph (1) of Government Emergency Ordinance no. 37/2020.
- What is the procedure to be followed by individuals who want to suspend the payment of installments?
Individual debtors, personally, or in the case of legal persons, by their legal representatives, must send a written request to creditors in this regard, either on paper or by electronic mail, at the contact details indicated in the credit/leasing contract or through another remote communication channel provided by the creditor (registered letter with acknowledgment of receipt/fax) no later than 45 days from the entry into force of this emergency ordinance, i.e., until May 15, 2020.
The suspension of installment payments can also be requested orally, by telephone, at a special telephone number that will be published on the website of each bank/NBFI, with the conversation recorded by the creditor.
Within a maximum of 15 calendar days from the date of receiving the request, the creditor communicates its decision to approve/reject the application for the suspension of payment obligations.
Modification of contractual clauses as a result of the approval of the debtor’s request under the provisions of Government Emergency Ordinance no. 37/2020 is made without concluding additional acts.
- What happens to the interest during the suspension of the loan?
Throughout the period of loan suspension under Government Emergency Ordinance no. 37/2020, deferred interest will be capitalized – meaning it will be included in the principal of the loan – and will be spread over its duration, representing “a distinct and independent claim in relation to other obligations arising from the credit agreement,” for which no interest will be paid. Payment of these deferred interests will be staggered over 60 installments, starting from the month immediately following the end of the deferral period, which means that no interest will be paid on interest for mortgage loans by individuals.
- Can legal entities also benefit from the provisions of Government Emergency Ordinance no. 37/2020?
The answer is affirmative; the categories of legal entities that can benefit from the deferral of installments are as follows:
– Those that are not in insolvency at the time of requesting the suspension of loan repayment, according to the information available on the National Trade Register Office’s website.
– Those with partially or totally interrupted activity as a result of authorities’ decisions or have a certificate from the Ministry of Economy showing that revenues for March have decreased by more than a quarter compared to the average for January and February 2020 and hold an emergency certificate issued by the Ministry of Economy, Energy and Business Environment or hold the emergency situations certificate issued by the Ministry of Economy, Energy and Business Environment, obtained under the law, based on the application submitted by the legal representative of the company.
– Sole proprietors (PFA), individual enterprises (II), and family businesses (IF), liberal professions, and professions exercised under special laws, if their activity has been totally or partially interrupted and has resulted in a reduced market, a reduction in the number of employees, a decrease in the number of suppliers, etc.
- How was the exact application of the ordinance determined?
The exact application of the ordinance was established by the methodological norms set by the Ministry of Finance based on Government Decision no. 270/2020 published in the Official Gazette on April 6, 2020.
Because it is essential that the rights of citizens be respected, we stand by you during this critical period to ensure that the business of our clients is protected.
Article by Tania Maria Câmpan, associate lawyer at SCPA CÂMPAN & ȚIMONEA