The new act on transitional measures to stabilize the situation of certain key social groups and enterprises in financial difficulties will be issued nowadays (already approved by the Parliament). The law will extend by June 30, 2021, the payment moratorium to those raising children, pensioners, unemployed, public employees (special part of state related employees) and businesses in financial difficulty. In addition, the law prohibits termination of all credit and loan agreements and financial leasing agreements until the aforementioned date.
In order to mitigate the economic impact of the epidemic, credit and loan agreements and financial lease agreements (credit agreements) contain two main measures:
An exception to the scope of the measures are products provided to the state, the local government and to companies subject to the legislation specified in Section 39 of the Act CXXXIX of 2013 on the Hungarian National Bank (basically institutions supervised by MNB, such as credit institutions, insurance companies, investment fund managers), so neither moratorium nor prohibition on termination can apply in their case as debtors.
Prohibition of termination of credit
Credit agreements existing on 18 March 2020 may not be terminated by creditors until 30 June 2021 due to non-fulfillment of the debtor's obligation to pay principal, interest or fees. This prohibition on termination automatically applies to all credit agreements not covered by the payment moratorium, with the general exceptions described above.
The legislature expects the parties to agree to renegotiate the terms of the contract throughout the end of the prohibition of termination to restore the debtor's solvency. The parties shall amend the loan agreement in accordance with the conditions laid down by mutual agreement, in particular the amount of the principal, interest and fee obligations and the due date for their performance. The amended contract does not have to be notarized, the previous notarial deed is valid within the framework of the amended content of the contract. The change in the deadline for performance of the contract also modifies the additional and non-additional ancillary obligations securing the contract.
Credit repayment moratorium
The moratorium on payments, announced in spring, on 18 March 2020 will be automatically extended for four groups. This group includes those who are, on 1 January 2021 or between 1 January 2021 and 30 June 2021 (in the case of debtors, it is sufficient if one meets):
Unless the parties provide otherwise, the payment of interest, fees and principal will also be suspended, however, the law also confirms that it is still possible to repay under the original contract. The contractual term will be extended by the duration of the moratorium, while the expiration date of contracts expiring during the payment moratorium will be changed to June 30, 2021. The change in the deadline for performance of the contract also modifies the additional and non-additional ancillary obligations securing the contract.
Unless the debtor provides otherwise (i.e. wishes to exercise the option of a payment moratorium), the repayment procedure is modified as follows:
The provisions on the payment moratorium shall also apply to employer loans disbursed through a financial institution.
Credit repayment moratorium for businesses
The payment moratorium is not automatic (they must ask the creditors in writing), but it also applies to companies that qualify under the government decree defining a company in financial difficulty, which will be issued later.
According to the law, the application must contain the information necessary to identify the contract, as well as the data on the basis of which it can be established that the debtor is entitled to a moratorium on loan repayment under the Government Decree on the definition of firms in financial difficulty.
The mentioned above raises a number of practical issues that require further interpretation or additional work for stakeholders, such as:
Unfortunately, the end of the coronavirus epidemic is not yet in tangible proximity, but an extension of the payment moratorium could help mitigate the negative economic effects. However, as can be seen, this can be a significant task both for all debtors, but especially for financial institutions.
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