When a bank loan becomes payable ahead of schedule

A loan becomes payable ahead of schedule on the date when the bank’s declaration that it is calling in the loan reaches the borrower, provided the objective conditions for loss of the benefit of the agreed term are then met. This follows from Interpretative Decision No. 4/2013 of the Supreme Court of Cassation. In addition to the objective conditions, acceleration requires an act of will: the bank must address a declaration to the borrower calling in the loan. Whether and when to exercise that right is entirely for the holder to decide. Acceleration thus requires two legal facts: the debtor’s default and an express declaration by the creditor withdrawing the benefit of the agreed term.

Under Article 114(1) of the Obligations and Contracts Act, the limitation period runs from the time the claim becomes due. The borrower undertakes to make the scheduled annuity instalments under the loan agreement. Limitation therefore runs separately for each instalment, which includes the agreed remunerative interest, from the date on which payment of that instalment to the bank fell due.

A clause providing for acceleration cannot operate automatically: that interpretation is incompatible with the binding guidance on Article 60(2) of the Credit Institutions Act in point 18 of Supreme Court of Cassation Interpretative Decision No. 4/2013. Acceleration can therefore occur only at the creditor’s election, expressed through an affirmative act. See Supreme Court of Cassation judgment No. 64 of 09.02.2015 in civil case No. 5796/2014.

This article does not provide a legal opinion or advice about any particular person or situation. For legal assistance in an individual case, consult a lawyer.