At the initiative of the Georgian Bar Association, a roundtable discussion on issues of over-indebtedness and lending and credit regulations is being held at the Radisson Hotel. The meeting is attended, alongside representatives of the Bar Association, by Members of Parliament, Deputy Ministers of Justice and Finance, the Minister of Economy and Sustainable Development, and the Vice President of the National Bank. Within the framework of the meeting, the Executive Director of the Georgian Bar Association, Giorgi Tshekhani, presented his vision and views on addressing the problem of over-indebtedness.
In particular, it was noted at the meeting that Georgian lawyers, in the course of their professional activities, encounter hundreds of thousands of cases on a daily basis in which credit institutions, in most instances, abuse the vulnerable position of borrowers and bind them to such onerous and exploitative contractual terms that providing effective legal assistance becomes impossible. Placing citizens in such a grave legal situation may be regarded as a violation of fundamental human rights.
In line with the vision presented by Giorgi Tshekhani, the following steps are considered essential:
- (a) In lending relationships, exceeding the statutory maximum threshold of the effective interest rate should be deemed usury and declared unlawful, in accordance with the German model;
- (b) In order to end citizens’ perpetual debt bondage, legislation should establish a specific time limit (not exceeding 10 years) within which a creditor may carry out compulsory enforcement against a debtor. As a result, individuals would be able to reintegrate fully into normal civil and economic relations;
- (c) The charging of interest on interest in lending relationships should be unequivocally prohibited by law;
- (d) The law should establish a maximum amount of contractual penalties in lending relationships, which should not exceed one-half of the annual interest rate;
- (e) A mechanism of mandatory prior disclosure and proper assessment of solvency should be introduced with respect to guarantors, pledgors, and owners of mortgaged property;
- (f) A legislative framework should be developed to allow for the declaration of personal bankruptcy for natural persons, thereby giving citizens an opportunity to restart their economic activity with a clean slate.
The leadership of the Georgian Bar Association will continue to work actively with the relevant authorities on the implementation of this initiative.
