Amendments to Civil Code
15.01.2017
On January 15, 2017 the Law of Georgia # 239, dated December 29, 2016, On Amendments to The Civil Code of Georgia, came into force. 
These amendments were conditioned by ever increasing number of companies on the Georgian market, which grant online loans under simplified procedures. At the expense of the lack of public awareness about financial and legal aspects, these companies set such terms and conditions in their contract, that place consumers in explicitly grave situation. 
As regards bank credit relationships, the legislator considered that the current provisions regulating  the determination of interest rate were loyal towards a creditor and it was necessary to provide for stricter regulations to protect the interests of a debtor.
With a view to ensuring the protection of consumer rights in bank credit relationships and statutory restriction of disproportionally high interest rates and financial sanctions, the following amendments were made to the Civil Code of Georgia: 
  • New article 5051 was added to the Civil Code of Georgia which provides for the obligation of a seller upon installment purchase to act in accordance with the requirements prescribed by Article 625 of the Civil Code of Georgia with regard to interest rates and commissions, also imposition of forfeit or any other financial sanctions. 
  • Article 625 of the Civil Code of Georgia determined the upper threshold for loan interest rate, specifically the annual efficient interest rate of a loan should not exceed 100 percent. 
  • Article 625 of the Civil Code of Georgia determined the maximum value of all types of financial sanctions for the borrower upon raising a loan. Specifically, the foregoing should not exceed annual 150 percent of the balance principal amount of the loan, provided by contract. 
  • Article 625 of the Civil Code of Georgia sets certain limits on raising loans in foreign currency. Specifically loan up to 100 000 GEL can be granting to a natural person only in national currency. The loan can be issued in foreign currency, only when the amount to be granted exceeds 100 000 GEL according to official exchange rate for the moment of raising the loan.
  • As per Article of the Civil Code of Georgia, a lender is prohibited from charging consumers with early repayment fee, forfeit or any sanction exceeding percent of the balance principal amount of the loan, in the case of refunding of the loan raised thereby, also in the case of repayment of loan with consumer's money or money given thereto by a third person, which sanction exceeds 2.
  • As per Article 868 of the Civil Code of Georgia, the requirements of Article 825 are imperative in the case of raising bank credits as well (regulations related to interest rate and forfeit). 
The requirements related to determination of upper threshold of interest rate and forfeit do not apply to loans, raised before January 15, 2017, nor to loans issued by economic units, also during bank credit. 

 


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The Law Firm Kordzakhia, Jgenti, GP was founded in 1999 as a Partnership. Prior to foundation the current partners of the company had independent advocacy practice and were advanced specialists in their respective fields. Since 2003 the company had been operating as a General Partnership –"Pataraia and Partners," and from 2009 the Law Firm has been carrying out its activities under the current name. Read More
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01.09.2017
In September 2017 Nino Soselia became a Partner of "Kordzakhia, Jgenti" GP.
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