Consumers, Leasing contracts, News

Enhanced Protection for Consumers in Leasing Contracts

The leasing legislation was recently amended to enhance consumer protection in leasing contracts.

As such, on 19 April 2021 Law no. 83/2021 amending and supplementing the Government Ordinance no. 51/1997 regarding leasing operations and leasing companies entered into force.

Firstly, Law no. 83/2021 provides that leasing contracts where the user is a consumer no longer represent writ of execution. In practical terms, this means that leasing companies will need to obtain a court decision in case of a default by a consumer, instead of having access to a simplified enforcement procedure. According to Law no. 83/2021 the capacity of consumer acting with a personal scope is presumed. Such capacity is analysed considering the respective contract and not the entire activity of the debtor.

During the legislative process the Government did not support this amendment in the viewpoint it issued. The Government considered that amending the executory character of leasing contracts only for a category of debtors would breach the principle of security of the legal relations; at the same time, the debtor is protected under the general civil procedural rules that allow any debtor to invoke defences on the merits against the executory title that is not a court decision.

At the same time, a plea of unconstitutionality was raised during the legislative process. The authors considered, among other reasons, that there are sufficient legal means to ensure consumer protection, including their right to file a challenge to enforcement. However, the plea was rejected by the Constitutional Court, as inter alia (i) the conditions for a person, respectively a consumer, to file a challenge to enforcement in case of executory titles other than court decisions were roughened by recent changes of the civil procedural rules and (ii) the provision is not discriminatory.

Secondly, Law no. 83/2021 provides that in case the user that has the capacity of consumer does not pay the leasing instalments for three consecutive months, the financing party has the right to cancel the contract. There are three novel changes here: (i) the default period was changed from two months to three months, (ii) parties cannot derogate from this term and (iii) the provision applies only to contracts with consumers. With respect to the last issue, the Constitutional Court rejected the plea of unconstitutionality raised during the legislative process. The Court considered that even if the legal provision only refers to consumers, as opposed to the previous version of the provision that referred to any type of user, this does not mean that the financing party has no remedy in case of a default by professionals. Parties can regulate in the contract consequences of default, as allowed by the Government Ordinance no. 51/1997.

Thirdly, Law no. 83/2021 regulates a priority right of the user that has the capacity of consumer or of a third party designated by the user to acquire the asset in case of the cancellation mentioned above if the asset has been restituted within the contractual deadline, at a price at least equal with the countervalue of all owed amounts according to the contract. The amounts that the debtor must pay further to the cancellation of the contract were diminished compared to the previous version of the provision. As such, damages would be mandatorily diminished with the value the financing party obtains by selling the asset, or with the value determined by an evaluation report issued by an authorised evaluator.

The amendments above will be applicable to leasing contracts concluded after 19 April 2021 when Law no. 83/2021 entered into force.