One can read interesting announcements in the Armenian “Gind” classified ads weekly such as “We are giving credits with a 6% interest rate if you have real estate to leave as a deposit”, “We can provide business credits if you have real estate to leave as deposit”, etc. There are physical persons who offer long-term credits for 5% interest rate.. On the one hand, there seems to be no problem here; people have money and they want to invest it. On the other hand, it is illegal.
According to the RA legislation, only banks and credit organizations have a right to give credits (Civil Code, Article 887). Physical persons don’t have a right to provide such services. Why do newspapers publish such information? I was told by a bank lawyer that “the given newspaper staff is to blame”. As for the newspaper, they told us that “they are not responsible for the content of the announcements published in their newspaper”. Furthermore, they said that among those announcements there were both physical and juridical persons. But the fact is that there are physical persons.
How can physical persons offer such services if they are not entitled to that? According to Article 877 of RA Criminal Code, “Depositors may give deposits to Creditors if the Creditor leaves money or other property as a deposit.” The difference is that that deposit can be given only in the form of money. Besides that, in that case, the creditor may not take interest rates. In fact, in those announcements physical persons do what the abovementioned law provides based on the procedures of the first one. According to specialists, they are violating the law. According to them, when making such a contract the interest rate mentioned cannot exceed the doubled sum of the interest rate fixed by the Central Bank for such deals. As for the CB, the mentioned mark, they say, covers 12-14%. In July, the banking interest rate range fixed by the CB was 15%. Accordingly, the eligible interest rate percentage that physical persons may take is 30%. The physical persons offering money for an interest rate equal to 5% of the sum get 60% interest rate within one year. Even though those announcements don’t state whether those interest rates are fixed for a month or a year, they told us that it was fixed for one year. Besides that, asking for 5-8% interest rates would not be realistic for Armenian economy. Thus, the CB fixes the annual interest rate for physical persons at 30%, but the minimum annual mark they fix exceeds 60%. “In this case, depositors may sue the creditors for offering them money in accordance with illegal terms”, say lawyers.
What does the CB have to say about that? It turned out that the CB hadn’t heard about that before and after we told them they started discussing the case. The case went through processing for several days. At last we received a letter from the CB stating, “In Armenia, giving credits must be licensed. Only banks, credit companies and Lombard companies can provide credits. As of 26.06.06 the Central Bank sent a letter numbered 13-08/0836 to the governmental taxation committee to investigate the cases of physical persons providing credits illegally”. In fact, in times like these the most difficult thing is to find those people. Couldn’t they find those violators in a month? They had all the necessary information. Maybe they don’t want to punish those who violate the law.