As is well known, the issue of providing consumer credits and loans is closely related to the sale of goods via the internet, and its importance continues to grow. On 1 January 2011, the new Act No. 145/2010 Coll., on Consumer Credit, will enter into force, which will completely replace the current legal regulation given by Act No. 321/2001 Coll., on Certain Conditions for Concluding Consumer Credit. This new Act also transposes the relevant regulations of the European Communities and regulates the rights and obligations related to a loan, credit, deferred payment or other similar financial service provided (or promised) to a consumer by a creditor. Overall, there is an increase in the protection of persons interested in consumer credits.

In the case of consumer credit, the Act establishes numerous obligations for creditors, particularly the following:

a) information obligation

• if consumer credit is offered through advertising that includes any information about its costs, the advertisement must contain the information specified in Annex No. 1 to the Act (the Annex lists items under letters a) – g) about which the consumer must be informed, e.g. the annual percentage rate of charge, the interest rate, information on all fees, the amount of credit, the total amount of credit, the amount of instalments,…),
• the creditor must provide further information with sufficient time in advance before concluding the contract. The creditor shall provide this information to the consumer in writing or on another durable medium. The scope of obligations is set out in Annex No. 2 to the Act (letters a) – s)). The information obligation may be fulfilled by presenting a special form, which is also set out in the Annex to the Act (Annex No. 6). The Act contains an exception for cases where credit is concluded at the consumer’s request through means of distance communication that do not allow the provision of pre-contractual information in the manner stated above – in this case, the creditor is obliged to provide the information immediately after concluding the credit agreement,
• the creditor is further obliged to provide the consumer with adequate explanations so that the consumer is able to assess whether the proposed contract, in which consumer credit is to be concluded, corresponds to his needs and financial situation. Adequate explanation means primarily an explanation of the pre-contractual information, including the consequences of default, and basic information on the individual products offered and their impacts on the consumer,

b) obligation of written form

• a contract in which consumer credit is concluded requires written form, - one copy of the contract must be received by the consumer in writing or on another durable medium.

c) assessment of the consumer’s ability to repay the consumer credit

• before concluding the contract, the creditor is obliged to assess with professional care the consumer’s ability to repay the consumer credit, on the basis of sufficient information obtained also from the consumer, and if necessary, by consulting databases enabling the assessment of the consumer’s creditworthiness. The consumer shall provide the creditor, at his request, with complete, accurate and truthful information necessary for assessing the consumer’s ability to repay the consumer credit.

If the contract in which consumer credit is concluded does not contain all the necessary information and the consumer raises this fact with the creditor, the consumer credit shall be deemed from the outset to bear interest at the rate of the discount rate valid at the time of concluding this contract published by the Czech National Bank, and agreements on other payments on the consumer credit shall be invalid.

The consumer is thus given the opportunity, on the basis of the information provided, to assess whether the proposed credit agreement corresponds not only to his needs but also to his financial means. The Act does not apply to credits provided for housing (if the claim is secured by a lien on real estate), the purpose of which is the acquisition of ownership rights to real estate, the settlement of ownership relations to real estate or the construction of real estate, nor to credits provided without interest or any charge, or to credit with a total amount lower than CZK 5,000 or higher than CZK 1,880,000.

This text was translated from Czech to English using an AI translator.