Upcoming Amendment to the Consumer Credit Act: Strengthening Provider Liability

The government-approved draft amendment to Act No. 257/2016 Coll., on Consumer Credit ("CCA"), represents the most extensive intervention in consumer credit regulation since the CCA first took effect. The primary objective of the amendment is the transposition of Directive (EU) 2023/2225 of the European Parliament and of the Council on credit agreements for consumers ("CCD2"), which replaces the previous Directive 2008/48/EC. It reflects the dynamic evolution of the financial market, particularly the digitalization of credit products and the emergence of new forms of financing.

Expanded Scope and Price Caps

One of the key aspects of the amendment is the significant expansion of the CCA’s material scope. Under the new regime, consumer credit regulations will apply to loans provided via digital platforms and Buy Now, Pay Later (BNPL) products, which were previously largely exempt.

A significant systemic innovation is the introduction of price caps on consumer credit. The amendment establishes limits on the maximum cost of consumer credit, differentiated between:

• Standard loans: Managed through a cap on the Annual Percentage Rate of Charge (APR).

• Small loans (up to CZK 20,000 with a maturity of up to six months): Managed through a limit on the total cost of the credit.

Information Obligations and Marketing

The amendment further refines and expands the information obligations of credit providers. The provider is responsible for ensuring that the consumer, prior to concluding the contract, understands the economic consequences of the credit—specifically the APR and basic credit parameters. Simultaneously, it strengthens requirements for the clarity of contractual documentation and for the informed consent of the consumer regarding follow-up services or ancillary products.

Rules for advertising and marketing have also been tightened. Providers are liable for ensuring that communications are truthful, balanced, and non-deceptive, allowing consumers to realistically assess the costs and risks associated with the credit.

Impact on Providers

For consumer credit providers, the amendment necessitates a fundamental revision of contractual documentation, internal procedures, and IT systems. The impact will be particularly palpable for entities offering short-term and digitally distributed credit products that previously operated on the fringe of, or outside, the CCA framework.

While an increase in regulatory costs is expected, the amendment should also lead to enhanced legal certainty and the cultivation of the market as a whole. In the long term, the unification of rules at the European level may contribute to increased consumer confidence in financial products and a reduction in unfair commercial practices. For practical purposes, timely adaptation to the new regulatory requirements will be critical, as non-compliance may carry significant legal and economic consequences.

This text was translated by AI.