There is no need to legally define something that is done voluntarily

Once upon a time, more than 20 years ago, I had an acquaintance whom I met from time to time. He had been looking for a job for a long time, and a year after he got employed, he was fired. At that time, it was a kind of tragedy for a man, but for him, it was even greater – because he took out a loan and bought a one-bedroom apartment.

Fortunately, his story did not end tragically because he was helped by his extended family who worked in Germany. But I remember, even before that, whenever we met, I would first ask him about work. He would just shake his head because those were the times when you could only get into a state or public institution through connections, or it was difficult to get into the private sector due to the high number of unemployed. Then he got lucky because his uncle, who worked in Germany, did a favor for an entrepreneur, and out of gratitude, he employed his nephew.

Everything was fine, a fairly solid salary was coming in every month (which at that time was a significant achievement for an employee and a measure that he had landed a good job), so my acquaintance decided to settle down in his nest. He took out a loan, bought a small apartment concluding that it was enough for a start and paid it off regularly. However, the remainder after paying the annuity was not something to boast about, but having his own apartment made it worthwhile to live a little frugally. The important thing was that it had started.

Apartment ‘on the auction block’

Then one day, the owner of the company retired, his son took over the business, who had other plans that did not include my acquaintance, so he served his notice period and found himself back on the job market. He was very worried about how he would pay off the loan and was slowly coming to terms with the fate that his apartment would go ‘on the auction block’. However, as I mentioned, he was very close to his relatives in Germany, who continued to pay the loan installments until he got employed again after some time.

I haven’t seen him for a long time, I don’t know where his life path has taken him, but I believe he managed to pay off the loan, especially since he had strong support from his extended family. I thought of him while reading the Proposal for the Amendments to the Law on Housing Consumer Credit these days. It is actually about consulting on the form of the preliminary assessment for that law, but one proposal intrigued me in the whole story.

Namely, one commentator suggests that the loan user should be allowed ‘at least six months in which, for example, in the case of job loss or illness, he would be able to continue repayment’. The proposer also presents an interesting argument because he says that the bank would not be at a loss because late fees would accrue, and such a legal solution would ‘enhance the protection of vulnerable groups such as the unemployed and the sick’. In addition, he believes it would be useful to prescribe a mechanism for this type of loan that would prevent the sale of receivables to collection agencies before a certain phase of enforcement and/or attempts at refinancing, waiting, etc.

Different times

I inquired with a banker, who says that banks offer such an option anyway, and that it is without a legal obligation, noting that it is not about late fees, but about regular interest that continues to accrue for the entire time the annuity is not paid. Banks provide this to their clients precisely for the reasons mentioned by the commentator of the Proposal for Amendments to the Law.

Therefore, although the commentator’s proposal is commendable because it thinks about helping people while not harming the bank at the same time, I am not sure that the best solution is to impose something by law if there is already a willingness from the banks. Because they themselves initiate enforcement or sell receivables to collection agencies only when they exhaust all possibilities for the continuation of loan repayment. For banks, the worst option is when they have to take over the property and waste time organizing an auction to sell it, and on the other hand, this further worsens their not-so-great public image.

After all, times are different. Today, people find jobs more easily even in Croatia, unlike the time when my acquaintance lost his job.

POST SCRIPTUM

– Banks have this option, and they are even happy to use it. They can use it, for example, not only for people who lose their jobs but also for those who go on long-term sick leave or even for pregnant women and new mothers until they start receiving their full salary again with which they can pay the annuities. People sometimes cannot influence the life around them, and we respect that, and besides, banks will do everything to avoid foreclosures on properties – explains the banker interlocutor.