This content is from: Local Insights

Late payment on bank enforcement procedures

Dr Teuta DobiEndrit Shijaku

In recent years in Albania the number of non-performing loans has been on the rise and the courts are facing an increasing number of default loan cases. Banks are turning their eyes towards the judiciary to see the courts’ reaction.

Bank loan agreements are executive titles and, for the purpose of enforcement, the courts only need to conduct a summary judgment to issue a writ of execution; merits are not reviewed in such cases. However, there are inconsistencies that need to be addressed in the manner in which the courts and bailiffs deal with certain aspects of such enforcement judgments.

One important aspect that gives rise to such inconsistencies seems to be the issue of late payment interest. As is customary, loans made by banks do generally include provisions for late payment interest, which apply in respect of the period from the time the payment is due until the time the payment is actually made.

In most cases, the courts issue a writ of execution confirming that the loan is an executive title and should be enforced on the terms and conditions, which should typically include late payment interest until the day that the entire claim is satisfied.

In practice, however, bailiffs are failing to apply the interest accrued up to the date that the claim is satisfied (the date that the bailiffs’ hand over the monies collected from the sale of the seized goods). They are simply calculating the interest accrued up to the date of the writ of execution. This is a problematic and costly issue for banks given the lengthy timeframe of the enforcement procedure, which can take up to one or two years where the debtors are uncooperative.

What seems to be occurring is that there is a perception that the loan agreements are terminated as at the date of the writ of execution thus any interest due after that date is considered to come under the concept of damages, for which the banks are advised by the bailiffs to seek further court redress. Most loan agreements do not, of course, confirm termination of the agreement until full and final payment is made, but it seems some do.

In cases where banks do try and seek further court redress for the sum of interest accrued during the enforcement period, the courts treat this request and the appropriate remedy as being that of damages.

This is notwithstanding that this amount outstanding is technically still a pending amount not dealt with under the executive title and thus the banks should be able claim it as an improper enforcement of the original writ of execution.

Dr Teuta Dobi and Endrit Shijaku

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