Licensing Of Entities Providing Consumer Loans

Current status

In the Slovak consumer lending market, in addition to banks, an important role is also currently played by other providers, which are usually denominated as non-banking companies.

Until recently, and in contrast to banks, such non-banking companies were not required to obtain a license from the National Bank of Slovakia ("NBS") or from other state authorities in order to provide loans, and were only subject to NBS supervision to a limited extent. Act No. 129/2010 Coll. on consumer loans, as amended ("Act"), which serves as legal basis for the provision of consumer loans, stipulated that the only obligation of non-banking companies was to register in a so-called "creditors registry" administered by the NBS. This main obligation of a non-banking company, when compared with the licensing procedures of other entities in the financial sector (such as the previously mentioned banks or insurance companies), represented a significantly simpler entrée to the Slovak market, without the need for fulfilling more demanding procedures. This, however, is set to change.

Adopted amendment

On 3 February 2015, the National Council of the Slovak Republic adopted an amendment to the Act ("Amendment"), which introduces various substantial changes concerning the regulation of consumer lending. The majority of the Amendment will be effective as of 1 April 2015.

Obligatory licensing

The Amendment introduces legal regulations under which only an entity which has obtained a license from the NBS will be entitled to provide consumer loans. If the person or entity listed as the creditor in a consumer loan agreement provides said loan without the respective license, the agreement is invalid.

The requirement to obtain a license will not apply to a domestic bank, a foreign bank, or a branch of a foreign bank, since these entities provide loans on the basis of a bank license from the NBS. In addition, other obligations defined by the Act will not apply to these banking entities.

To obtain a license, the applicant will have to fulfil various conditions. For instance, the applicant must be either a joint stock or limited liability company with a fully paid monetary contribution to the registered capital of at least EUR 500,000, and must have a supervisory board. In addition, the applicant is required to fulfil various conditions related to its personnel, to establish internal departments (such as an internal control department) and to have a system for...