Draft law on a temporary (statutory) moratorium (Lex Covid Loan Moratorium)
Up to date as of 8 April 2020
On 1 April 2020, the Government approved a draft law on certain measures in the area of loan repayment in connection with the COVID‑19 pandemic ('Lex Covid Loan Moratorium') on the basis of which debtors will be able to defer the repayment of their loans for a period of up to six months. The draft law (with certain amendments) was approved by the Chamber of Deputies on 7 April 2020, and is now set to be discussed in the Senate. If approved, Lex Covid Loan Moratorium is likely to come into effect within a few days of its final approval.
Applicability. The moratorium applies to all loans concluded and drawn down before 26 March 2020, regardless of their governing law or whether any of the parties is e.g. a foreign entity; with regard to loans intended for the acquisition (construction, etc.) of real estate, it suffices if the corresponding loan agreement had merely been concluded by 26 March 2020 (no draw down before that date is necessary). While the law is intended to apply to non-consumers as well, there are still a few exceptions – the law will likely not apply to investment instruments, revolving loans, overdraft facilities, operating leases, credit cards, etc. The law will also not apply to debtors that were in default with their payments under a loan agreement for more than 30 days as at 26 March 2020.
Opt-in and period of protection. The law is based on the underlying concept that any debtor that would be interested in deferring repayment must inform the creditor (the bank) thereof. The obligation to repay is thus not deferred automatically, but debtors are legally entitled thereto. When informing the creditor of the repayment deferral (this must generally be done so in writing), the debtor must also state that such deferral is due to the negative economic effects of the COVID‑19 pandemic (though there is no obligation to prove that it is actually the case). The creditor must inform the debtor that it has received the corresponding notice, of the period of protection and the total amount owed, and may not charge any fees in relation to the deferral. The period of protection runs from the first day of the month following the month in which the debtor's notice was delivered until 31 October 2020 (or 31 July 2020, should the debtor choose to make use only of the shorter period of protection). The duration of the loan (and any security thereunder) is extended by the duration of the period of protection. Repayment of interest is also deferred in relation to individuals, and a limit has been imposed on interest accrued during the period of protection for consumer loans. Legal entities and entrepreneurs on the other hand must continue to pay interest. Regardless of whether a debtor (an individual) decides to opt-in, creditors do not have any right to any payment in the event of a debtor's default during the period from the moth following the month when the law comes into effect until 31 October 2020. If a legal entity decides to make use of the moratorium, it will generally not be able to dispose of assets, which could be used to satisfy its creditors.