Rights of Consumers Regarding Online Consumer Loans

With increasing inflation and the COVID-19 crisis, more and more consumers are turning to companies offering online loans, as their issuance is extremely easy and accessible from anywhere in the country. However, with the growing number of online loans being taken out, there is also a rise in unpaid or so-called “bad loans” obtained online. More and more consumers are contacting us with cases related to unpaid online loans, some of which were even taken out quite some time ago.

Here are some of the main cases related to online consumer loans that various citizens are dealing with:

  • I repaid the money early, but they kept calling and harassing me. Later, they filed a lawsuit against me, but I didn’t keep the note that I paid.
  • I didn’t take out an online loan, but I received a court summons stating that I owe a sum for an online loan.
  • I’m not sure I withdrew the exact amount for this loan, but they’re currently claiming the same amount from me.
  • I withdrew a specific amount, but they’re now demanding double or triple the amount I withdrew.
  • My debt has been transferred to a collection agency, and I don’t have access to the documents in my file.
  • My debt has been transferred to a collection agency, and I’ve been paying it off for quite some time, but the amount remains the same.

If you’ve had a similar case, this article is for you, as we’ll try to systematically and briefly clarify the main points and rights of consumers regarding online consumer loans. Online loans are subject to the Distance Financial Services Act, the Electronic Document and Electronic Certification Services Act. Regarding online loans, borrowers are consumers, and therefore all protections provided by the Consumer Protection Act and the Consumer Credit Act fully apply to them.

According to Article 10, paragraph 1 of the Distance Financial Services Act, before the consumer is bound by an offer or contract for the provision of financial services at a distance, the supplier must timely inform them of all the terms of the contract for the provision of financial services at a distance and provide them with the information under Article 8 and Article 9 on paper or another durable medium accessible to the consumer. According to Article 18, paragraph 1 of the Distance Financial Services Act, in contracts for the provision of financial services at a distance, the supplier must prove that they have fulfilled their obligations to provide information to the consumer, complied with the deadlines provided for in the Distance Financial Services Act, obtained the consumer’s consent to conclude the contract and, if necessary, for its performance during the period when the consumer has the right to withdraw from the contract concluded; and that electronic messages meeting the requirements of the Electronic Document and Electronic Certification Services Act have been exchanged between the parties.

Often, companies providing online loans do not meet these conditions, and consumers are not familiar with the terms under which they will repay the loan. In the contractual clauses of such loans, extremely high penalties are usually included, which in essence are negligible in most cases. Also, in such credit agreements, there are often various fees such as “fee for the costs of collecting overdue receivables,” “fee for expert review of a request for a loan,” “fee for the activities of an employee,” and many others.

Negotiating such fees in the loan agreement contradicts the law and good morals. Such clauses contradict the creditor’s obligation to assess the consumer’s creditworthiness before granting a loan. Therefore, clauses in the loan agreement that stipulate such fees are contrary to good morals, and charging a monetary obligation related to them constitutes an abuse by the creditor.

Fees for the provision and collection of the loan are by their nature such as to fall under the prohibition of the Consumer Credit Act on requiring the creditor to pay fees and commissions for actions related to the appropriation and management of the loan.

In a subsequent article, the question of the relationship between collection agencies and the consumer (user) of the online loan will be addressed.

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