YEREVAN, April 11. /ARKA/. Artur Harutyunyan, a lawyer from the Center for Development and Legal Studies, urged the government on Wednesday to draft a legislation that would set maximum permissible amount of interest rates and commission fees on loans. Unveiling the findings of a study that looked into this issue, he said it analyzes the lending legislation and the problems in this area from the point of view of the protection of human rights.
Harutyunyan said the study asks whether it is necessary to establish a ceiling for interest rates on loans issued by banks and credit organizations and whether the size of fines and penalties on overdue loans should be restricted as well.
He said some credit organizations in Armenia provide loans with interest rates as high as 100% or even higher. “We have come to the conclusion that the government should have a role in this matter. Loans provided at a rate higher than 24% hinder the economic development of the country. Therefore, it is necessary to set limits on real rates not only for banks, but for other lending organizations as well, be they pawnshops or credit organizations, “he said.
Harutyunyan said the study also calls for a legislation amendment that would set reasonable limit for loan servicing commissions or other payments. There is another problem, according to Harutyunyan – when a borrower is no longer able to make the interest and other payments set by the contract, the interest and commissions continue to accrue on his loan along with penalties for overdue payments. “The current legislation does not restrict the accrual of commissions for servicing the breached loan contract.
Therefore, we propose that in case of breached loan agreement the accrual of interest and other payments cease,” he said. According to him, borrowers in Armenia had the opportunity to apply to courts to seek to reduce to reasonable limits the size of fines and penalties on their overdue loans. But according to legislative changes passed in 2018, this opportunity is available only to borrowers who meet certain conditions, for example, Karabakh war veterans.
“We propose that the Civil Code provide for vesting courts with power to assess fines and penalties on the loan and reduce them independently without having to seek advice of third parties. This power should apply to all loan agreements without restrictions on the term and social status of the borrower,” he said. -0—
