Efficiently spent costs caused by an early repayment of the mortgage
What costs can a bank require to be reimbursed by the consumer in connection with an early repayment of a consumer credit for housing?
On March 7, 2019, the Czech National Bank issued a statement on the concept of "efficiently spent incurred costs incurred by the creditor in connection with early repayments of consumer housing loans" Statement of the Czech National Bank on purposefully incurred costs that can be demanded from the consumer in connection with an early repayment of a consumer credit for housing under Act No. 257/2016 Coll., On Consumer Credit. By this interpretation, the CNB responded to the unclear wording in the Czech Consumer Credit Act, which raised recurring questions from both the public, and consumer credit providers, and at the same time about the excessively high costs charged by banks.
According to the CNB's interpretation, banks can charge clients only those costs that are directly related to the early repayment of consumer housing loans and the amount of which also must be justified. In particular, the administrative costs of early repayment (i.e. directly related to the processing and execution of a consumer's application for early repayment or its announcement of an extraordinary loan repayment, typically the relative cost of the employee's salary) will meet the conditions for efficiently incurred costs caused by an early repayment (such as: an employee who processes an application for early repayment, land registry fees, postage, printing and copying costs, telephone charges or consumed office supplies). It may also include fees for any notarial acts that the early repayment required. However, providers can prove compliance with the conditions for efficiently spent incurred cost caused by early repayment even for other costs. However, these costs would have to be spent purposefully (in accordance with due diligence, which presupposes that the consumer can use his or her early repayment right), and that this should not be a financial cost irrespective of whether the loan is repaid prematurely or not, and would have to be demonstrably incurred in a specific amount in connection with the early repayment of a particular loan. At the same time, the amount of the reimbursement may not exceed the financial loss of the creditor.
An example of what cost, in the opinion of the Czech National Bank, is not admissible is a commission paid by the provider to an intermediary for arranging a consumer credit for housing.
The cost incurred in the early repayment of a residential consumer credit is also not, among other things, a reduction in the bank's interest income after the early repayment of the residential consumer credit or the provider's interest costs on its debts. In the first case, in the opinion of the CNB, this is not a cost but a loss of profit. In the second case, in the opinion of the CNB, this is not a cost incurred in connection with the early repayment of a consumer credit for housing, but again a (in vain) cost of providing consumer credit. Thus, the reduction in profit from the interest margin and the possible (in vain) costs of refinancing, irrespective of their designation (eg "opportunity costs", "cost of obtaining funds", "loss of interest income"), cannot be subordinated to effectively spent Provider's costs incurred in connection with early repayment of the loan, as there is no statutory link to early repayment, and therefore cannot be reimbursed, which the Provider may require from the consumer under Section 117 (2) of the CAA.
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JUDr. Mojmír Ježek, Ph.D.
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