On the decision of the the judgment of the Court of First Instance on the fine imposed by the State Consumer Rights Protection Authority
NEO Finance, AB (legal entity code 303225546, registered office address Ukmergės st. 126, Vilnius, hereinafter referred to as the "Company") hereby informs that on 10 December 2024, by decision of the Regional Administrative Court of the Republic of Lithuania, the Administrative Court of the Republic of Lithuania dismissed the Company's appeal against the fine of EUR 100,000 imposed by the decision of the Commission of the State Consumer Rights Protection Authority of the Republic of Lithuania (hereinafter referred to as the "SCRPA") of 21 March 2024 on the Company for the violation of Article 40, Paragraph 2 of the Law of the Republic of Lithuania on Consumer Rights Protection.
The SCRPA initiated the investigation after receiving information from the Vilnius Regional Court about the Company's possible continued application of clause 6.6 of the General Terms and Conditions of the Company's consumer credit agreement, which was declared unfair and invalid ab initio by the final court procedural decisions, which stipulated that if the borrower breaches the obligation to make payments under the consumer credit agreement on time and the Company applies to court for debt recovery, the parties agree that the borrower shall be subject to a 15% annual procedural interest charge and referred to the investigation of the possible further application of this clause in the conclusion of new consumer credit agreements and in the performance of existing ones, as well as the possible imposition of sanctions in accordance with the procedure laid down by law.
The company points out that case law has not been uniform, with some courts awarding higher procedural interest and others not. Once the case law of the appellate courts became uniform on the treatment of the relevant clause of the consumer credit agreement, the Company immediately prevented any potentially harmful consequences for the borrowers of the consumer credit agreement which would have put them at risk of the application of the 15% procedural interest rate provision.
The Company also notes that the above-mentioned clause of the consumer credit agreement was partly intended to compensate for the losses incurred by customers when investing through the peer-to-peer lending platform administered by the Company. In the context of legal proceedings, record inflation and extremely high base interest rates of the European Central Bank, the failure to meet monetary obligations on time resulted in losses which were not compensated by the normal procedural interest of 5%.
As a peer-to-peer lending platform operator, the Company has sought to balance the interests of consumer borrowers and investors. Such a balance becomes particularly important in situations where a consumer borrower fails to repay the consumer credit within the repayment period set out in the consumer credit agreement. This leads to a situation where the investor does not receive the intended remuneration for the financing provided, while the borrower continues to benefit from consumer credit, often at an interest rate significantly higher than the normal procedural interest rate of 5%, which is not conducive to the expeditious execution of the judgment.
"When we were informed that our contractual provisions and claims in court proceedings may not have been in line with the latest court practice, we took immediate steps to correct the situation and rectify the mistakes without waiting for the final conclusion of the SCRPA. Our team worked closely with the debt collection company to analyse the situation and to find the most appropriate solutions to both address the situation and to improve the processes in place. However, in our view, the current situation, whereby the default on contractual obligations is economically advantageous and beneficial for the borrowers of consumer credit, distorts the balance of justice values between borrowers and investors. We will appeal against this judgment to the Supreme Administrative Court of Lithuania", says Evaldas Remeikis, Head of Administration.
The fine will not affect the Company's performance and will have minimal impact on its financial position.
Head of Administration
Evaldas Remeikis
E-mail: evaldas.remeikis@neofinance.com
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