Regarding legal practice in credit disputes: action algorithms and tactical decisions were discussed by a lawyer, PhD in Law, Associate Professor of International and European Law Department at the Leonid Yuzkov KhUUP Andrii Ivanitskyi during a professional development event for lawyers held at the National Academy of Advocacy.
The lecturer thoroughly analyzed the legal practice in credit disputes with the participants, namely:
- 1. What is a ‘credit’, ‘credit dispute’ and its types.
- 2. Action algorithm and tactics of a lawyer in disputes related to ‘real credits’.
- 3. Action algorithm and tactics of a lawyer’s work in disputes related to ‘fraudulent credits’.
Within the characterization of legal practice in credit disputes, the focus was on the following:
1. What is a ‘credit’, ‘credit dispute’ and its types
Credit is money provided by a lender (bank, MFO, or other financial institution) to the borrower (individual, sole proprietor, legal entity), and the borrower is obliged to return it to the creditor within a specified period, with interest and other payments, fees.
- credit – money provided by a financial services provider (lender) to an individual (borrower) for use on a revolving basis for a specified period with interest payment (Art. 1 of the Law ‘On Financial Services and Financial Companies’);
- bank credit – any obligation of a bank to provide a certain amount of money, any guarantee, any obligation to acquire the right to claim a debt, any extension of the debt repayment period granted in exchange for the debtor’s obligation to return the amount owed, as well as the obligation to pay interest and other fees on such amount (Art. 1 of the Law ‘On Banks and Banking Activity’);
- consumer credit (loan) – money provided to a consumer (borrower) for the purchase of goods (works, services) to meet needs unrelated to entrepreneurial, independent professional activities or the performance of duties as an employee (Art. 1 of the Law ‘On Consumer Lending’);
- under a credit agreement, a bank or other financial institution (lender) undertakes to provide money (credit) to the borrower in the amount and on the terms specified in the agreement, and the borrower undertakes to repay the credit and pay interest (part 1 of article 1054 of the Civil Code of Ukraine);
- and so on.
A credit dispute is a dispute between a lender and a borrower or their successors regarding the collection of the amount owed, which may consist of the principal debt, interest, penalties, penalties, compensation, commissions, etc.
Types of credit disputes:
- Obtaining a loan corresponded to the free will and desire of the client, and the client desired the real legal consequences resulting from receiving such funds (‘real credit’).
- Obtaining a loan did not correspond to the client’s desire, the funds were received on behalf and at the expense of the client by third (unknown) parties, often by obtaining the client’s personal data (‘fraudulent credit’).
2. Action algorithm and tactics of a lawyer in disputes related to ‘real credits’:
- Pre-trial settlement:
- Agreement on restructuring by deferring the debt, ‘forgiveness’ of penalties, etc. (carried out only with the consent of the financial institution, or under the conditions of para. 7-1 of the Law ‘On Consumer Lending’).
- Resolving the issue of writing off 3% per annum, inflation losses, penalties (fines, penalties) during a state of war.
- Resolving the issue of exemption from paying interest on the use of the loan, penalties, penalties for servicemen.
- The maximum daily interest rate calculated in accordance with the fourth part of this article shall not exceed 1% (part 5 of article 8 of the Law ‘On Consumer Lending’).
- ‘Credit holidays’ by deferring loan repayment, putting the loan on ‘pause’ (carried out only with the consent of the financial institution).
Point 18 of the Final and Transitional Provisions of the Civil Code of Ukraine, during the period of a state of war, emergency, and within thirty days after its termination or cancellation, in case of the borrower’s default on the performance of a monetary obligation under the contract, under which the borrower was granted a loan (credit) by a bank or other lender (creditor), the borrower is released from liability defined by Article 625 of this Code, as well as from the obligation to pay a penalty (fine, penalty) for such default in favor of the creditor (lender). It is established that the penalty (fine, penalty) and other payments provided for by the relevant contracts, accrued from February 24, 2022, for default in performance (non-performance, partial performance) under such contracts, are subject to write-off by the creditor (lender).
That is, from February 24, 2022, if the borrower defaults on their loan obligation, 3% per annum, inflation losses, and penalties (fine, penalty) are not charged by the creditor, and if charged, they are written off. However, interest on the use of the loan is not subject to write-off during a state of war.
- Judicial settlement:
- Familiarization with the terms of the loan agreement and verification of the agreement of all essential terms of the contract (loan amount, terms of its provision, interest payment for the loan use).
- Determining the agreed loan term between the client and the lender.
- Calculation of the actual amounts paid by the client to the lender, conducting a counter-calculation, and providing relevant documents to the court (principal debt, interest, etc.).
- Requesting necessary evidence in accordance with Article 84 of the Civil Procedure Code (loan provision, client payments, loan extension, increase, etc.).
Decision of the Grand Chamber of the Supreme Court dated March 28, 2018, case No. 444/9519/12 (interest within the loan term):
After the expiration of the agreed loan term or in case of a claim presented to the borrower in accordance with the second part of Article 1050 of the Civil Code of Ukraine, the creditor’s right to accrue interest on the loan ceases. The rights and interests of the creditor in protective legal relations are ensured by the second part of Article 625 of the Civil Code of Ukraine, which regulates the consequences of default in the performance of a monetary obligation.
Decision of the Grand Chamber of the Supreme Court dated July 4, 2018, case No. 310/11534/13-ц (penalty within the loan term):
The existence of a court decision on early satisfaction of the creditor’s claims for the entire amount of the debt, which the debtor did not fully perform, is not a basis for charging interest and penalties under the loan agreement, which has been amended by the creditor, as evidenced by the court decision, and therefore, the term of the agreement has changed.
Decision of the Grand Chamber of the Supreme Court dated July 3, 2019, case No. 342/180/17 (relevant for loan applications of PrivatBank, monobank application, and other terms and rules of banking services, which are a separate ‘unagreed’ appendix to the loan agreement):
In the specified decision, the Grand Chamber of the Supreme Court, among other things, noted that since the ‘Terms and Rules of Providing Banking Services’ have been repeatedly amended by PJSC CB ‘PrivatBank’ from the time of the emergence of disputed legal relations until the moment of applying to the court with the specified claim, that is, the creditor could add to the statement of claim the Tariffs Extract and the Conditions Extract in any editions most favorable for satisfying the claim.
The Tariffs Extract for servicing credit cards ‘Universal’ ‘Universal, 30 days grace period’ and the Extract of Terms and Rules of Providing Banking Services at PrivatBank resource: Archive of Terms and Rules of Providing Banking Services are posted on the website: https://privatbank.ua/terms/, are not recognized by the respondent and do not contain her signature, therefore, they cannot be considered as part of the loan agreement concluded between the parties on February 8, 2011, by signing the application form.
Thus, there are no grounds to consider that the parties agreed in writing on the price of the agreement, which is established in the form of interest payment for the use of credit funds, as well as liability in the form of penalties (fines) for violating the terms of contractual obligations.
Decision of the Grand Chamber of the Supreme Court dated February 4, 2020, in case No. 912/1120/16 (impossibility of simultaneous calculation of interest and Article 625 of the Civil Code):
The relations regarding the payment of interest for receiving the debtor’s ability to lawfully not pay the creditor the debt for a certain period are regulated by law. In particular, according to the first part of Article 1048 of the Civil Code of Ukraine, the lender has the right to receive interest from the loan amount from the borrower unless otherwise provided by the contract or the law; the amount and procedure for receiving interest are determined by the contract; if the contract does not establish the amount of interest, their amount is determined at the level of the National Bank of Ukraine’s accounting rate.
The consequences of defaulting on a monetary obligation, when the debtor must pay money but unlawfully does not pay it, are also regulated by law. In this case, according to the second part of Article 625 of the Civil Code of Ukraine, the debtor is obliged to pay the amount of the debt taking into account the established inflation index for the entire period of default, as well as three percent per annum of the overdue amount if another interest rate is not established by the contract or the law.
In other words, since the debtor’s behavior cannot be both lawful and unlawful at the same time, the regulatory provision of the first part of Article 1048 of the Civil Code of Ukraine and the protective provision of the second part of Article 625 of this Code cannot be applied simultaneously.
3. Action algorithm and tactics of a lawyer in disputes related to ‘fraudulent credits’
- Pre-trial settlement:
- Compile a list of MFOs, banks, or other financial institutions that provided a loan to the ‘client’ (Ukrainian Credit History Bureau, etc.);
- File a complaint about committing a crime (Article 190, etc.) + if not included in the ERDR, a complaint to the investigating judge;
- Submit a complaint to the MFOs, banks, or other financial institutions that provided a loan to the ‘client’ and attach an extract from the ERDR, a decision recognizing the victim, or a memo;
- Appeal with a complaint to the NBU.
Within the application to the financial institution, specify the following:
- The absence of the client’s will and personal desire to commit and conclude a loan agreement (microloan, credit, microcredit) with such an organization;
- All loan agreements (microloans, credits, microcredits) concluded by unidentified persons on behalf of the client with such an organization are not concluded, the rights and obligations under such agreements are not acquired, and the legal relations under them have not arisen;
- Do not account for any financial debt on behalf of the client to such an organization;
- Request the pre-trial investigation authority to provide all information, documents, and information related to the conclusion by unidentified persons on behalf of the client of loan agreements (microloans, credits, microcredits) with such an organization for inclusion of such evidence in the materials of the criminal case.
- Judicial settlement:
- As a defendant within the court case, provide evidence of the existence of a crime, appeal to the financial institution with a relevant statement.
Requesting necessary evidence in accordance with Article 84 of the Civil Procedure Code (information about the location of the number, information about the bank card to which the credit funds were transferred, ‘credit agreement,’ etc.
- Appeal with a statement of claim (counterclaim) to protect consumer rights by declaring the contract invalid.
Petition to suspend the civil case due to the crime (para. 6 part 1 of Article 251 of the Civil Procedure Code).
Decision of the Cassation Civil Court as part of the Supreme Court dated February 3, 2023, case No. 757/22453/20:
Establishing that the money under the disputed agreement was transferred to a bank card that does not belong to the plaintiff, the account NUMBER_6 opened in PJSC ‘Alfa Bank’ in the name of PERSON_1 was closed on January 29, 2020, card NUMBER_7 was canceled, no other accounts were opened in this bank by the plaintiff, the loan agreements were not concluded, the cards with NUMBER_1 at PJSC CB ‘PrivatBank’ are not owned by the plaintiff, the plaintiff does not have them, the absence of the plaintiff’s will to conclude the disputed legal acts, the court of first instance, with which the appellate court agreed, came to a reasoned conclusion on the invalidity of the disputed agreement since the credit agreement of December 10, 2019, No. 126421 does not meet the requirements of Article 12 of the Law of Ukraine ‘On Electronic Commerce’ and the conditions specified in it violate the requirements of the Law of Ukraine ‘On Consumer Protection’.
The Supreme Court agrees that during the client verification process, the company did not fully identify the person with whom the agreement was concluded. Therefore, in the absence of proper and admissible evidence that the disputed legal act was concluded by the plaintiff himself, not by any other person, and in the absence of her will to conclude the disputed legal act and the proper evidence of the plaintiff receiving the specified credit funds, considering that the funds were transferred by the respondent to bank card NUMBER_1, which was not issued by PJSC ‘Alfa Bank’ or PJSC CB ‘PrivatBank,’ and the respondent did not refute these circumstances, there are grounds to declare the disputed agreement invalid.
Source – https://tinyurl.com/yzudkfh6