Home Core functions Supervision of Compliance and Protection of Rights Protection of the Rights of Credit Institutions’ Clients and Users of Financial Services What you need to know before and after concluding a consumer loan agreement?

What you need to know before and after concluding a consumer loan agreement?

What is the Form PK?


In its Decision on the Content of the Form for Informing Consumers on Consumer Loans, the Central Bank of Montenegro defined the contents of the Form PK, which contains key information that creditors and credit intermediaries must deliver to the consumer before concluding a consumer credit agreement. This form allows consumers to compare the offers of different loans (cash loan, purpose-specific loan, mortgage loan, remodelling loan, housing loan, credit cards, overdraft facility, and all other loans that are not intended for the occupation or activity of the consumer - the loan beneficiary).


Therefore, the aim of providing the information is to enable the consumers, before concluding the contract, by comparing the offers of different creditors (credit institution - bank, microcredit financial institution, leasing company), to accept the one that they find tailored to their needs and financial situation.


Form PK contains information on the following: 

  • Main characteristics of credit product;
  • Total costs of the credit for the consumer;
  • Other legal aspects important for the consumer.


The Right to Information on the Amount of the Effective Interest Rate - EIR


EIR shows the total costs of the loan for the consumer, including interests, fees, taxes and other costs that the consumer is required pay in connection with the loan agreement, including the costs of contracts on ancillary services such as insurance policies, when the conclusion of that contract is a condition for obtaining a loan or obtaining a loan under the offered conditions.


The creditor is required to provide the consumer with information on the amount of EIR before concluding the loan agreement.


Creditors are required to calculate EIR using a uniform methodology, as specified in the Decision on the Calculation and Reporting of the Effective Interest Rate on Loans and Deposits.



Right Of Unilateral Termination Of The Consumer Credit Agreement Without Legal Consequences


The consumer has the right to a unilateral termination of the credit agreement within a period of 14 days from the day of the conclusion of the credit agreement, without giving any reason, and without legal consequences.


In the case of unilateral termination of the consumer credit agreement, within a period of 14 days, the consumer is required to:

  • notify the creditor of the termination before the expiry of the 14-day deadline;
  • pay to the creditor the principal and the interest accrued thereon no later than 30 days following the dispatch of the notification to the creditor.


The creditor is not entitled to any other compensation from the consumer, except compensation for notary costs relating to the agreement and other supporting documents paid by the creditor.



Right of Early Repayment of Obligations under a Consumer Credit Agreement 


The consumer may, at any time, discharge, fully or partially, their obligations under a consumer credit agreement and in such cases, they are entitled to a reduction in the total cost of the credit by the remaining amount of interest rates and other costs for the remaining duration of the agreement.


In the event of early loan repayment of credit, the creditor is entitled to fair and objective compensation for justified costs directly linked to early repayment of credit, if the amount of the early repayment exceeds 10.000,00 euro within the period of 12 months (counting from the day of early repayment). 


With a view to protecting the consumers, the Consumer Credit Law prescribes that the creditor must set a fair and objective compensation for justified costs, which may not exceed 1% or 0.5% of the amount of credit repaid early.


The creditor is not entitled to compensation if:

  1. the repayment has been made under an insurance contract intended to provide a security for the credit repayment; 
  2. in the case of overdraft facilities, or
  3. if the early repayment is made within a period for which interest rate is not fixed.


Examples of early repayment of amounts of 10,000 euro and more:

  1. If the consumer makes an early repayment of the part of the principal in the amount of 10,000 euro, the creditor is not entitled to compensation;
  2. If the consumer makes an early one-off repayment of the principal amount of 10,001 euro, the creditor is entitled to compensation.


Examples for early repayment of the amount of 11,000 euro - the basis for calculating the compensation:

  1. If the consumer makes an early one-off repayment of the principal amount of 11,000 euros - the creditor is entitled to compensation, and the basis for calculating the compensation is 11,000 euro;
  2. If the consumer makes an early partial repayment of the principal amount of 6,000 euro, after three months the amount of 3,990 euro, and after three months following the second partial repayment, the consumer pays another 1,010 euros - the creditor is entitled to compensation, and the basis for calculating the compensation is 1,010 euro;
  3. If the consumer makes an early partial repayment the principal amount of 9,900 euro, after one month the consumer repays another 1,100 euro - the creditor is entitled to compensation, and the basis for calculating the compensation is 1,100 euro.


Therefore, if the consumer arranges the dynamics of early partial repayments in such a way that the amount of the last early repayment - which, combined with the previous payments, exceeds the threshold amount of 10,000 euro, is in a lower amount, that lower amount will be the basis for charging the compensation, and thus the compensation that the consumer will be required to pay will be lower. 



Right to Information for Agreements with a Variable Interest Rate 


Where variable interest rates are agreed, the creditor must inform the consumer, in writing, on paper or another durable medium, of: 

  1. any changes in those rates; 
  2. the amount of the payments to be made by the consumer as of the day of entry into force of the new interest rate, and 
  3. information on the number or periods of the payments, in case of changes. 


If the change to the interest rate is caused by a change in a reference rate that is made publicly available and kept available in the business premises of the creditor, the credit agreement may provide for the obligation of periodical notification of the consumer on the abovementioned information.