FAQs in connection with the Emergency Deferral of Borrowers’ Liabilities Act (ZIUOPOK)
The Emergency Deferral of Borrowers’ Liabilities Act (ZIUOPOK) was adopted at the proposal of the government. Its exact manner of implementation is a business decision for the commercial banks. To help borrowers, the Bank of Slovenia has drawn up answers to a number of frequently asked questions, in conjunction with the Ministry of Finance, which drafted the new law. For any more detailed questions, please contact the ministry.
1. What credit liabilities are covered by the ZIUOPOK? Are leasing and payment account overdrafts included?
The ZIUOPOK does not define what constitutes a credit agreement for which the deferral of payment of liabilities may be requested. Other regulations are therefore of relevance in answering this question: general credit agreements are regulated by the Obligations Act (the ZOR), while consumer credit agreements are regulated by the Consumer Credit Act (the ZPotK-2). According to the ZPotK-2, consumer finance leases or leasing and overdraft facilities in consumer payment accounts are also defined as consumer credit agreements. Thus there is no bar to banks approving (for business entities and consumers alike) the deferral of the payment of liabilities for other types of banking product not falling under the definition of a credit agreement under Article 1065 of the ZOR or the ZPotK-2, in accordance with their internal rules.
2. Does the law apply to leasing companies?
No. The ZIUOPOK does not apply to leasing companies, but only to banks and savings banks established in Slovenia, and branches of Member State banks established in Slovenia.
3. Does the law also apply to corporate bonds?
No. The deferral measure set out by the ZIUOPOK applies solely to liabilities under credit agreements.
4. Does the ZIUOPOK apply to customers who are resident in Slovenia but who are not Slovenian nationals?
No. The ZIUOPOK does not apply to such people.
5. Can the bank and the borrower agree on a shorter or longer deferral period?
Yes. The bank and the borrower may agree a shorter or longer period for deferring the payment of liabilities under a credit agreement if this is better for the borrower and if the borrower so requests. They may also agree on other details of the payment deferral. Agreements of this type are also classed as measures concluded on the basis of the emergency law.
6. Can the bank charge costs for the deferral? Can the deferral be tied to other conditions?
The law has no provisions relating to the costs of approving the deferral and concluding the annex to the credit agreement, and therefore there is no legal basis for prohibiting the charging of any fees that might be set by banks in their standard price list for processing requests for the deferral of payment of liabilities under credit agreements. We do however call on commercial banks to make any fees charged for processing requests for payment deferrals reasonable and based on actual costs, as the purpose of the ZIUOPOK is not to use these extraordinary circumstances to boost non-interest income. The content of the annex is the result of the expression of the free intention of the two contracting parties. However, any further unreasonable requirements by the bank that result in (eligible) payment deferrals not actually taking place are contrary to the law. In extreme cases the Bank of Slovenia may as the supervisor rule that a bank that fails to approve the deferral of the payment of liabilities under a credit agreement for a borrower who has cited substantiated grounds and has demonstrably met the conditions has committed a misdemeanour under the ZIUOPOK.
7. How is the size of instalment payments addressed? How is interest charged? When does the deferred interest fall due for payment?
The updated Article 5 of the ZIUOPOK unambiguously stipulates that the borrower is deferred to pay both the outstanding principal and the interest payment, while interest continues to accrue at the ordinary interest rate agreed when the credit agreement was concluded, but does not become payable at the time of the deferral. The borrower is not obliged to pay interest at the time of deferral, but interests are nevertheless calculated, so the annex to the loan agreement stipulates how the bank and the borrower will repay them after the deferral is completed. The regular payment of interest during the deferral period can be agreed at the borrower’s request. Other arrangements would entail a partial write-off of the borrower’s liabilities, which is not the purpose of the law.
8. What happens after the deferral ends?
After the end of the deferral period, the first deferred instalment falls due for payment 12 months later than was agreed in the original credit agreement. This means that the payment of each liability is deferred by 12 months. For example, if the individual liabilities fell due for payment on 30 June 2020, 30 September 2020, 31 December 2020 and 31 March 2021, after the deferral they will fall due on 30 June 2021, 30 September 2021, 31 December 2021 and 31 March 2022. However, the borrower and the bank may agree on a deadline for payment of the liabilities that is more favourable to the borrower.
9. How does the extension of loan collateral work?
The ZIUOPOK stipulates that the term of the contract that serves as collateral for the credit agreement is also extended for the duration of the payment deferral.
10. What if the borrower meets all the conditions for deferral under the emergency law, except that individual liabilities under the credit agreement fell due for payment before 12 March 2020 and have not been paid?
Individual liabilities under a credit agreement that had not fallen due for payment by the time of the declaration of the epidemic are subject to deferral, while individual liabilities under the same credit agreement that fell due for payment before the declaration of the epidemic are not subject to deferral under the ZIUOPOK. The deferral of liabilities not covered by the ZIUOPOK, such as liabilities that fell due for payment before 12 March 2020, may also be agreed with the borrower by the bank at any time. The bank may not condition the deferral of non-past-due liabilities on the payment of liabilities that fell due for payment before 12 March 2020.
11. Who submits the declaration that as at 31 December 2019 the borrower had settled all past-due liabilities from mandatory taxes, social security contributions and other levies?
Borrowers submit their own declarations, enclosing the relevant confirmation from their tax office.
12. How do individuals provide arguments and evidence for their inability to repay liabilities under a credit agreement with a bank?
The ZIUOPOK does not prescribe a specific application or request for deferral of payment, and it is therefore a matter of agreement between bank and borrower. This applies both to the submission of the declaration, and the definition of the more detailed content and evidence that the bank will take into account when approving a request. In so doing the bank must remain within the legal framework, and may not set unreasonable requirements for borrowers.
13. Does the ZIUOPOK also apply to credit agreements that are newly concluded or approved while the law is in force?
Yes, the ZIUOPOK also applies in these cases, if the borrower decides to take advantage of the options offered by the law. However, in this case too the borrower must be able to argue that repayment of the liabilities has been made impossible by the novel coronavirus epidemic, unless the borrower’s business activities have been prohibited by government or municipal ordinance. This does not mean that the bank automatically approves new credit. But insofar as credit is approved, the customer is automatically entitled to a deferral in the case of an ordinance of the aforementioned type.