Parliament has approved the new law on consumer protection, which for the first time provides for limits on the interest rates of consumer loans taken by citizens. Under the law, which is expected to come into force, the Bank of Albania and the Ministry of Economy will draft a joint instruction.
This instruction aims to protect citizens from possible abuses regarding the interest and costs of these loans. The move follows a loan fraud scheme that was uncovered more than two years ago. According to data included in the law, it directly and indirectly affected around 100,000 citizens.
Two licensed entities collecting non-performing loans, MCA and FINAL, to which banks had sold these loans, increased citizens’ obligations through interest and penalties. This happened despite the rules set by the Bank of Albania. Following this scheme, the Bank of Albania requested legal amendments to limit interest and penalties by law.
The law now approved includes two articles addressing this gap. Article 152 of the law stipulates that the maximum effective annual interest rate for a consumer loan agreement will be set by a joint instruction between the Bank of Albania and the ministry responsible for consumer protection.
This rate will include all fees, commissions and other costs related to the loan. Paragraph 3 of this article emphasizes that any contractual provision providing for an maximum effective annual interest rate above the permitted limit is absolutely null and void. Currently, the maximum rate is set by a regulation of the Bank of Albania and is reviewed every six months.
The approved law also provides for the establishment of the National Agency for Consumer Protection, the body responsible for protecting consumer interests in the market. This agency will have the right to investigate and even prohibit traders from selling goods or providing services if violations of consumer rights are found.
Meanwhile, another new law, currently under public consultation, will prohibit entities that buy and collect non-performing loans from imposing interest, penalties, commissions or fees higher than those provided for in the original loan agreement. These entities will also not be allowed to issue new loans, as the 2024 scheme revealed that they used this method to repay old debt while obtaining a new loan.
This has led citizens to lose their homes. The new law aims to close the legal gap that allowed citizens’ obligations to increase and to set clear limits on the costs of consumer loans. Thus, the Bank of Albania and the Ministry of Economy will be responsible for determining the maximum interest rate.