Amendments Introduced to the Financial Leasing Law
The Amendments to the Financial Leasing, Factoring and Financing Companies Law (the “Financial Leasing Law” or the “Law”) and Certain Laws numbered 7292 (the “Amending Law”) was published in the Official Gazette and entered into force on the same day on 7 March 2021. The Amending Law essentially provides a regulatory framework for the saving finance companies and their activities. In this article, we will briefly address some important changes brought to the Financial Leasing Law by the Amending Law.
Name of the Law:
The name of the Financial Leasing Law is changed by the Amending Law to read as “Financial Leasing, Factoring, Financing and Saving Finance Companies Law”.
Change in the Definitions:
Up until now, the entity that is responsible for, among other things, registration of cross border financial lease agreements was used to be named “the Association of Financial Leasing, Factoring and Financing Companies” (the “Association”). The Amending Law has changed the Association’s title to fully read as “the Association of Financial Institutions”.
Similarly, before the amendments, the Company was defined as “financial leasing, factoring and financing companies that are established in Turkey” within the meaning of the Financial Leasing Law. The Amending Law however includes “saving finance companies” into the scope of the Law and the Company is now defined as “financial leasing, factoring, financing and saving finance companies that are established in Turkey”.
The Amending Law further provides new definitions so as to regulate the terms “organization fee”, “allocation”, “saving finance activities” and “pool of saving fund”.
Saving Finance Activities and Companies:
According to the Amending Law, saving finance activity means saving for a given period in accordance with the principles of interest free financing for the acquisition of housing, roofed workplace or vehicle provided that the conditions predetermined in an agreement are met, letting the clients use financing and the management of the savings collected.
Saving finance companies are banned from financing debts that do not arise from housing, roofed workplace and vehicle acquisitions. The Amending Law also prohibits the saving finance companies from providing financing except for saving finance agreements, lending to third parties and acquiring shares. Saving finance companies are not permitted to use any expressions and names that are likely to create impression as if they are banks nor can they use the word “participation” on documents, announcements and advertisements.
Saving Finance Agreements:
The Amending Law sets forth that a saving finance agreement is an agreement drawn up in accordance with the principles of the interest free financing whereby (i) a right to use financing is granted to the client to acquire a housing, roofed workplace or vehicle provided that the conditions predetermined depending upon a certain saving amount and period are met; (ii) obligations to manage the client’s accumulated saving amount, to pay back and to make the clients use financing are imposed; and (iii) a right to ask organization fee is granted to the company.
It is promising to see that the saving finance services and companies are now regulated by the Amending Law and included into the scope of the Financial Leasing Law which we believe will bring some sort of legal clarity for the companies engaged in saving finance activities.
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