The reasoning substantiating the CCR’s decision declaring unconstitutional the legislative amendments regarding the penalty interests applicable between professionals and consumers and the effective annual interest was published

The Decision no.139/13.03.2019 of the Constitutional Court of Romania (CCR) was published in the Official Gazette of Romania on 3 May 2019, through which CCR declared the unconstitutionality of the Law for supplementing the Government Ordinance no. 13/2011 on the legal default and penalty interest for pecuniary liabilities, as well as for the regulation of some financial-tax measures in the banking field.

The object of the unconstitutional control

The object of the unconstitutional control was represented by the Law for supplementing the Government Ordinance no. 13/2011 on the legal default and penalty interest for pecuniary liabilities, as well as for the regulation of some financial-tax measures in the banking field, which provided the following:

• within the legal relationships between consumers and professionals, the penalty interest may produce itself interest only pursuant to a special agreement and only after exceeding the due date with more than one year;
• the effective annual interest (EAD) is capped as follows:

(i)          a maximum of 3 percentages, in case of mortgage or immovable property loans (such as it was defined by Law 190/1999 on mortgage credit for real estate investments);

(ii)         18% per year, in case of loans for consumption (i.e. any loan entered into by consumers that does not qualify as a mortgage or immovable property credit under Law 190/1999);

(iii)        50% per year, in case of credits, loans or any other forms of consumer financing, whose value in LEI at the signing date does not exceed the equivalent of EUR 3,000.

The substantiation of the CCR’s unconstitutional decision

• The Court declared the law unconstitutional in its entirety, given the following procedural irregularities:

(i)          from a formal standpoint, even if an explanatory memorandum was attached to the draft law, its content is too brief and deficient in terms of properly substantiating the draft law, and the reasons which require the amendment of the existing normative act are rather unclear;

(ii)         neither the socio-economic impact, nor the impact on the legal system were presented in the explanatory memorandum accompanying the draft law;

(iii)        the Economic and Social Council’s opinion was not requested as part of the legislative process.

• As the unconstitutionality of the law was entailed in its entirety by procedural irregularities, CCR did not analyse the other reasons of unconstitutionality raised (respectively, from a substantial and not procedural perspective).

What’s next?

• The Romanian Parliament has the obligation to ascertain that this legal legislative process ceased by effect of the law;
• Given that the CCR’s decision is based purely on procedural considerations, a new legislative proposal with a similar content may be initiated in the future;

In case of initiating such a new legislative proposal, the legislative process will be restarted, going through all the specific procedural steps and observing the CCR's indications regarding the unconstitutionality irregularities identified.