VTB-Armenia Bank applies 73% interest rate to overdue loans: HCA Vanadzor challenges in court legality of loan contract17:57, June 30, 2017 | News, Own news | Right to Property
In May 2016, private entrepreneur A. A. turned to HCA Vanadzor and said that VTB-Armenia Bank filed with the court a claim against him on confiscation of funds.
The Bank demanded that A. A. and H. N. and A. V. who provided guarantee for him, returned the funds under a loan contract signed back in 2013. The more so, the Bank demanded that the funds were returned at an interest rate of 73%, as according to the contract, another, higher interest rate was added instead of 22% prescribed by the contract after the contract expired.
This approach of the Bank is based on Article 887 of the RA Civil Code; accordingly, relations arising from loan contracts are subject to the regulations on loans in Chapter 46 of the Code, unless otherwise provided by the loan contract. At the same time, according to Article 411 of the said Code, in case the loan funds are not returned, the interests prescribed by the contract must be terminated and the bank interest calculation rates set by the RA Central Bank must apply and by its decision of November 9, 2010, the Central Bank set an interest rate of 12%.
However, VTB-Armenia Bank preferred to consider a more profitable interpretation of the Code and set an arbitrarily high interest rate. As a result, the borrower found himself in a desperate situation.
Moreover, the contract signed with the Bank contradicts several provisions of the law. Thus, the Bank considers it also necessary that the loan is repaid once the borrower faces a bankruptcy process. And this contradicts Article 39 of the RA Law on Bankruptcy that prohibits giving material or other redress to the creditors under contractual or other obligations without a court ruling, after the application on bankruptcy is accepted by the court.
And after all, the borrower’s right of property under the RA Constitution is violated; the Bank reserves the right to charge the amount from the borrower’s accounts in any other bank if he does not return the funds in due deadline, and the borrower is not even entitled to choose the account from which those funds may be charged.
S. Soghomonyan, lawyer at HCA Vanadzor, took on protection of the rights of A. A. and his guarantors and filed with the court a counter-claim on these grounds and demanded to consider the loan contracts invalid.
By its ruling of November 11, 2016, the General Jurisdiction Court of Lori marz (region) did not consider the above and all the arguments of the counter-claim and rejected it by granting VTB-Armenia Bank’s claim on seizing the funds. After examining the appeal against the said ruling, on May 18, 2017 the Court of Civil Appeals repeated exactly in its ruling the positions of the first instance court and rejected the appeal.
On June 19, 2017 A. A’s representative S. Soghomonyan appealed to the Cassation Court demanding to reverse the ruling of the Court of Appeals.
At the same time, she asked the Cassation Court some questions to clarify whether loan contracts might prescribe any provisions on liability for non-fulfillment of obligations and whether loan contract might prescribe any clauses contrary to the RA Constitution.