Consumer credit

Where a consumer credit or its intermediation is offered through an advertisement that includes any figures about its costs, this advertisement must contain

• in the case of consumer credit for housing purposes, the name of the provider or, where applicable, the intermediary;
• in the case of a requirement for collateral for consumer credit for housing purposes, information on this requirement;
• the annual percentage rate of charge, which must be given at least as visibly and clearly as any information on the borrowing interest rate;
• the borrowing interest rate, with the distinction whether it is a fixed or floating interest rate or a combination of both, along with the details of any charges linked to the consumer credit which form part of the total cost of consumer credit;
• the total amount of the consumer credit;
• the amount of individual instalments and, in the case of consumer credit for housing purposes also their number;
• the total amount payable by the consumer;
• the duration of the consumer credit;
• in the case of consumer credit in the form of a deferred payment for a particular good or service, their price and the amount of any advance;
• information on the obligation to conclude an agreement on an ancillary service relating to consumer credit, in particular insurance, where the conclusion of such a contract is a condition for obtaining the consumer credit under the terms and conditions offered and the cost of such a service cannot be determined in advance;
• where consumer credit is being offered in foreign currency, a warning that a change in the exchange rate may affect the amount of the repayment and the total amount payable by the consumer.

Before concluding a consumer credit contract other than for housing purposes, consumers must be provided with information on:

• the type of consumer credit;
• the contact details of the provider or intermediary, in particular the postal address for delivery, telephone number and, where applicable, e-mail delivery address;
• the total amount of the consumer credit and the conditions for its use;
• the duration of the consumer credit;
• goods or services and their cost, which would have been paid without the use of consumer credit, in the case of consumer credit in the form of deferred payment for goods or services and a tied consumer credit contract;
• the borrowing interest rate, the conditions governing the use of that rate and, where appropriate, any index or reference interest rate applicable to the initial interest rate as well as the terms, conditions and procedure for changing the borrowing interest rate; where different interest rates apply in different circumstances, the above information is on all interest rates;
• the total amount to be paid by the consumer and the annual percentage rate of charge for consumer credit, which must be further explained by means of a representative example, indicating any assumptions used for its calculation, for which the provider is required to take into account the requirements the consumer indicated; if the consumer credit agreement provides for different forms of drawing with different fees or borrowing rates, and if the provider uses the assumption set out in Part 2, point 2 of Annex 1 to the CCA, it states that other drawdown mechanisms applied to this type of consumer credit may lead to higher annual percentage rates of charge for consumer credit;
• the amount, number and frequency of payments to be made by the consumer or, where appropriate, the method of assigning payments to individual amounts owed with different borrowing interest rates for repayment purposes;
• charges for the management of one or more accounts recording payment transactions and drawdowns, unless the opening of the account is optional, payments for the use of a means of payment for payment transactions and drawdowns and any other charges resulting from the consumer credit contract and the conditions under which such charges can be changed;
• where applicable, the consumer’s obligation to pay the notary the cost of concluding a consumer credit contract;
• any obligation to conclude a contract for an ancillary service related to a consumer credit contract where the conclusion of an ancillary service contract is mandatory for obtaining consumer credit or for obtaining consumer credit under the terms and conditions offered;
• the applicable interest rate in the event of late payment or contractual penalty in the event of consumer arrears and any other consequences resulting from consumer arrears,
• any collateral required;
• the right to withdraw from a consumer credit contract;
• the right to make early repayment of consumer credit, and the potential right of the provider to get reimbursement of the costs incurred and the method of determining them;
• the right of the consumer to prompt and free notification about the search result in a database enabling consumer creditworthiness to be assessed in case the consumer credit request is rejected on the basis of database searches, and data on the database used;
• the right of the consumer to receive a draft text of the consumer credit contract free of charge;
• the time period for which the provider is bound by the information provided before the conclusion of the consumer credit contract or the proposal for the conclusion of the contract; and
• whether the possible use of capital generated by consumer payments rather than repayment of consumer credit will lead to the full repayment of the consumer credit.

Before concluding a consumer credit contract for housing purposes, the information specified in Annex 4 to the CCA shall be provided to the consumer.

A provider shall always make available in paper form, on another durable medium, or on its website:

• its contact details, in particular the postal address for delivery, telephone number or e-mail delivery address;
• the particulars of the register or list where it is possible to verify its authorisation to operate;
• data on the internal complaint handling mechanism;
• data on the possibility of out-of-court settlement of consumer disputes through the Financial Arbitrator;
• details on the supervisory authority;
• general information on the consumer credit process, including information required from the consumer pursuant to Article 84(1) of the CCA in order to assess creditworthiness;
• information on whether advice is provided pursuant to Article 85(1) of the CCA;
• the purpose of the consumer credit, including, where appropriate, that the purpose of the consumer credit is not limited;
• the forms and conditions for securing the consumer credit, if required;
• examples of possible duration of consumer credit;
• types of borrowing interest rates available, together with a brief description of fixed and floating rate characteristics, and where appropriate the name of the reference rate, on which the borrowing interest rate is dependent, and the name of its administrator, including the related implications for the consumer;
• in case consumer credit in a foreign currency is being offered, the indication of that currency, including an explanation of the consequences for the consumer arising from the conclusion of a consumer credit contract in a foreign currency;
• a representative example of the total amount of consumer credit, the total cost of consumer credit, the total amount payable by the consumer and the annual percentage rate of charge;
• any other costs that are not included in the total cost of the consumer credit and which the consumer has to pay in connection with the consumer credit contract;
• options for repayment of consumer credit to the provider including the number, frequency and amount of the repayments;
• where applicable, clear and concise notice that repayment of consumer credit under the consumer credit contract does not guarantee repayment of the total amount of consumer credit;
• conditions for early repayment of consumer credit;
• any claim for valuation of immovable property, costs resulting from this valuation for the consumer and information on whether the valuation must be made by the consumer;
• information on the obligation to conclude an ancillary service contract relating to a consumer credit where the conclusion of such a contract is a condition for obtaining consumer credit on the terms offered, including information on whether the consumer is limited to the offer of the provider or intermediary; and
• a warning on the possible consequences of non-compliance with the obligations related to the consumer credit contract.

A consumer credit contract shall always include the following information:

• type of consumer credit;
• contact details of the parties, and, if the consumer credit is intermediated, also the contact details of the intermediary, in particular the postal address, telephone number or, if applicable, the e-mail delivery address;
• total amount of consumer credit and the conditions for its use;
• duration of the consumer credit; if not possible, the method of its determination;
• determination of the goods or service and their price which would have been paid without the use of consumer credit, in the case of consumer credit in the form of deferred payment for goods or services or tied consumer credit;
• the borrowing interest rate, the conditions governing the use of that rate and, where available, the indication of any index or reference rate applicable to the initial borrowing interest rate, as well as the periods, conditions and procedure for changing the borrowing interest rate; where different borrowing interest rates apply in different circumstances, such information shall be given in respect of all the borrowing interest rates;
• the annual percentage rate of charge for consumer credit, any assumptions used to calculate that rate and the total amount payable by the consumer expressed in numerical terms and calculated with regard to the time of the envisaged conclusion of the consumer credit contract,
• the amount, number and frequency of payments to be made by the consumer and, where appropriate, the order of allocating payments to individual outstanding balances charged at different interest rates for the purposes of repayment; where in the case of consumer credit for housing purposes it is not possible to determine the amount, number and frequency of payments to be made by the consumer at the time of conclusion of the consumer credit contract, the provider shall specify the conditions on which the amount, number and frequency of payments to be made by the consumer depend;
• where a consumer credit contract with a fixed duration involves amortisation of the principal, information about the right to receive free of charge an account statement in the form of the amortisation table in Annex 5 to the CCA at any time during the duration of the obligation from such a contract;
• a statement showing the periods and conditions for the payment of interest and any associated recurrent or non-recurrent charges, if such charges and interest are to be paid without amortisation of principal;
• where applicable, the obligation of the consumer to pay charges for the management of one or more accounts recording payment transactions and drawdowns, their amount if known to the provider and the conditions under which those charges may be changed, unless the opening of such account is optional, the obligation of the consumer to pay charges for the use of a means of payment for payment transactions and drawdowns, their amount if known to the provider, and any other charges resulting from the consumer credit contract;
• the interest rate applicable in the case of late payments valid at the time the consumer credit contract is concluded and the conditions for its adjustment and other consequences resulting from consumer arrears;
• information on possible costs of notary services or other similar costs and their amount, if known to the provider;
• the requirement for collateral or insurance;
• information on the right to withdraw from a consumer credit contract other than for housing purposes, and the period within which that right may be exercised and other conditions for the exercise of that right, including information on the consumer's obligation to pay the principal and the interest payable under Article 118(4) of the CCA, as well as the amount of interest payable per day;
• information about the rights resulting from Article 119(1) and (3) of the CCA and the conditions for their exercise;
• information on the right to early repayment of consumer credit, where applicable information on the right of the provider to reimburse the costs incurred and, in case of consumer credit other than for housing purposes, information on how they are to be determined;
• information on how to terminate the contractual relationship,
• information on the possibility of out-of-court settlement of consumer disputes through the Financial Arbitrator;
• designation of the competent supervisory authority; and
• information as to whether the possible use of capital generated by consumer payments instead of repayment of consumer credit will lead to the full repayment of the consumer credit.

When providing or intermediating consumer credit through voice telephony, text or multimedia messages, a phone number with a higher-than-standard charge cannot be used to access services.

The provider shall provide an adequate explanation to the consumer so that the consumer can assess whether the proposed consumer credit contract corresponds to his or her needs and financial situation. Adequate explanation includes, in particular, an explanation of the pre-contractual information, including the consequences of arrears and the basic information on the individual products offered and their impact on the consumer.

The consumer shall provide the provider, upon request, with complete, accurate and truthful information for the purposes of creditworthiness assessment. The provider shall only provide consumer credit if, based on a professional assessment of the consumer’s creditworthiness, it is evident that the consumer will be able to repay the consumer credit. Otherwise, the consumer credit contract is invalid. In such a case, the consumer is obliged to return the principal amount of the consumer credit within a period appropriate to his or her possibilities.

The consumer may withdraw from a consumer credit contract other than for housing purposes without giving any reason and without any sanction within 14 days from the date of conclusion of this contract. In the event that this contract does not contain the information required by law, the withdrawal period shall not end earlier than 14 days after the provider has provided the missing information to the consumer in paper form or on another durable medium. If the consumer withdraws from the consumer credit contract, the consumer shall pay to the provider, without undue delay and no later than 30 days from the date of dispatch of the withdrawal, the principal and interest at the rate to which the provider would have been entitled if the withdrawal had not occurred, for the period from the date the consumer credit was drawn until the date the principal is repaid. In the event of the consumer’s withdrawal from the contract, the provider is not entitled to demand any further compensation from the consumer except for reimbursement of any irrecoverable fees paid by the provider to public authorities or other persons in charge of the performance of public administration.

A consumer is entitled to terminate a consumer credit negotiated for an indefinite period at any time with immediate effect, unless a notice period has been agreed. The provider may not charge a termination fee. However, the agreed notice period may not be longer than one month.

The consumer is entitled to repay consumer credit wholly or in part at any time of the duration of consumer credit. In such a case, the consumer is entitled to a reduction in the total costs of the consumer credit by the amount of interest and other costs the consumer would have had to pay had the consumer credit not been repaid early.

In the event of early repayment of consumer credit, the lender shall be entitled to reimbursement of necessary and objectively justified costs incurred by the lender in direct connection with the early repayment. However, pursuant to Article 117(4) of the CCA, in the version effective until 31 August 2024, the amount of such reimbursement may not exceed 1% of the early repaid portion of the total amount of consumer credit, provided that the period between the early repayment and the agreed end of the consumer credit exceeds one year. If this period is not longer than one year, the reimbursement of the expenses may not exceed 0.5% of the early repaid portion of the total amount of consumer credit. The provisions of the preceding sentences do not apply to the expenses that the lender is entitled to claim in connection with the early repayment of the consumer credit for housing purposes; with the exception of the early repayment of consumer credit for housing purposes related to the sale of immovable property, the purchase, construction or retention of rights of which was financed by such consumer credit or by which such consumer credit was secured, where the consumer is entitled to fully early repay the consumer credit for housing purposes on condition that the duration of the consumer credit contract exceeds a period of more than 24 months, while entitling lenders to claim reimbursement of expenses. However, such reimbursement may not exceed 1% of the amount of the consumer credit which has been early repaid, but no more than CZK 50,000. Pursuant to Article 117(5) of the CCA, in the version effective until 31 August 2024, the amount of reimbursement shall also not exceed the amount of interest that the consumer would have paid over the period from the early repayment to the end of consumer credit, and in the case of consumer credit for housing purposes for the period from early repayment to the end of the period for which the fixed borrowing interest rate is set.

Pursuant to Article 117(4) of the CCA, as amended, effective from 1 September 2024, the reimbursement for the costs of consumer credit other than for housing purposes and for consumer credit for housing purposes pursuant to Article 2(2)(a) of the CCA, which is not a residential loan (i.e. a purpose-specific loan pursuant to Article 2(2)(b) of the CCA or a building society loan pursuant to Article 2(2)(c) of the CCA), may not exceed 1% of the portion of the total amount of the consumer credit which has been early repaid, provided that the period between early repayment and the agreed end of the consumer credit exceeds one year. If this period is not longer than one year, the reimbursement of the expenses may not exceed 0.5% of the early repaid portion of the total amount of consumer credit. In the case of residential loans, the reimbursement of the costs may not exceed 0.25% of the early repaid portion of the total amount of consumer credit for each commenced year remaining until the end of the period for which a fixed borrowing interest rate is agreed upon, but may not exceed 1% of the portion of the total amount of consumer credit which has been early repaid.

With effect from 1 September 2024, Article 117(5) of the CCA has been amended to include (in addition to the limits mentioned above) a provision that for residential loans, the reimbursement of costs pursuant to Article 117(2) of the CCA may not exceed the actually incurred costs determined in accordance with Article 117a of the CCA. In certain specific cases, the lender may not claim reimbursement of early repayment costs at all.  Pursuant to Article 117(3) of the CCA, in the version effective until 31 August 2024, this applies if early repayment has been made:

1. from insurance benefit where the insurance was designed to secure the repayment of consumer credit;
2. in the case of consumer credit granted in the form of an overdraft facility;
3. during a period for which no fixed borrowing interest rate is set;
4. in the case of consumer credit for housing purposes within three months after the lender has communicated to the consumer a new amount of the borrowing interest rate pursuant to Article 102(3) of the CCA;
5. in the case of consumer credit for housing purposes as a result of death, long-term illness or disability of the consumer as a debtor under a consumer credit contract, or his or her spouse or partner, if this leads to a significant reduction in the consumer’s ability to repay consumer credit for housing purposes;
6. in the case of consumer credit for housing purposes, up to 25% of the total amount of consumer credit within one month before the date of the anniversary of the conclusion of the consumer credit for housing purposes contract.

With effect from 1 September 2024, in addition to the above cases, this also applies to the following cases where early repayment is made:

• in respect of consumer credit for housing purposes, if at least 24 months have elapsed since the conclusion of the consumer credit contract, if there has been a transfer of the ownership right to immovable property, a transfer of the right in rem to immovable property, a transfer of a cooperative share in a housing cooperative or a transfer of a share in another legal entity establishing the right to use a flat or a family house, if the consumer credit for housing purposes was secured by that immovable property or if the purpose of the consumer credit for housing purposes specified in Article 2(2)(b) of the CCA was related to that property or a part thereof, a cooperative share in a housing cooperative or a share in another legal entity establishing the right to use a flat or a family house;
• in respect of consumer credit for housing purposes, if at least 24 months have elapsed since the conclusion of the consumer credit contract, in connection with the settlement of joint ownership of spouses, the subject of which was immovable property, the right in rem to immovable property, a cooperative share in a housing cooperative or a share in another legal entity establishing the right to use a flat or a family house , if the consumer credit for housing purposes was secured by that immovable property or if the purpose of the consumer credit for housing purposes specified in Article 2(2)(b) of the CCA was related to that immovable property or a part thereof, a cooperative share in a housing cooperative or a share in another legal entity establishing the right to use a flat or a family house .

The provisions of Article 117(3), (4) and (5) and Article 117a of the CCA, governing the early repayment of consumer credit for housing purposes, as amended, effective from 1 September 2024, shall apply to contracts on consumer credit for housing purposes concluded during the effectiveness of these provisions, as well as to contracts on consumer credit for housing purposes with a fixed borrowing interest rate concluded before 1 September 2024, from the date on which the new period for which a fixed borrowing interest rate has been set (the “new fixation period”) begins after 1 September 2024, i.e. no earlier than 2 September 2024 (see separate opinion for more details; available in Czech only).