Serbia's banking sector is undergoing significant changes following the enactment of the revised Law on Consumer Protection in Financial Services, which has come into force approximately 20 days ago.

This law mandates that lenders cannot repossess a property if the buyer is unable to meet payment obligations, whilst also introducing provisions for advisory services aimed at enhancing consumer understanding.

According to Đorđe Gojković, a senior expert in consumer protection at the National Bank of Serbia (NBS), the effects of this legislation are already being observed, although he notes that these outcomes are influenced by prior measures that were in place.

Previously, a temporary measure had established limitations on interest rates that closely mirror the provisions now codified in the new legislation.

Gojković explained that once the law took effect, the earlier temporary measures were lifted, but the same interest rate restrictions for housing loans continued under the new framework.

This continuity has already shown preliminary effects, indicating a decrease in interest rates.

Financial consultant Vladimir Vasić commented on the broader implications of this law, suggesting that banks could benefit in the long term from these reforms.

He noted that approximately 70 to 80 percent of people in Serbia utilize an approved overdraft, which has also experienced reduced interest rates under the new rules.

These changes apply not only to approved overdrafts but extend to unauthorized overdrafts, credit cards, housing loans, and consumer loans.

Gojković provided statistical insights, noting that the average interest rates for approved overdrafts have dropped significantly due to these measures, revealing that without the restrictions, rates could have reached around 26 percent, whereas they now hover around 19 percent.

A mechanism has also been established requiring banks to inform clients about changes in interest rates.

Vasić highlighted that consumers receive notifications about reductions in interest rates directly from their banks via email, which reflects a trend influenced by declining Euribor rates.

The Law on Consumer Protection in Financial Services, in effect for 12 years prior to the recent amendments, has incorporated various European Union directives aimed at improving consumer rights.

This law allows consumers a 14-day reconsideration period to withdraw from credit agreements if they change their mind after review.

In contrast to previous protocols, borrowers now have the option to sell a property before repaying a loan, a shift that marks a significant transformation in consumer rights.

Previously common issues with non-performing loans (NPLs) are reportedly declining, with Gojković citing figures that show a record low in NPL rates for housing loans, standing at 1.35 percent in February.

This statistic indicates that, from a sample of 100 housing loans, only 1.35 are not being regularly serviced by borrowers.

Moreover, Gojković mentioned that many banks operate under parent companies based in European Union countries, emphasizing the necessity for compliance with EU rules and the importance of functioning within a more transparent environment.

The new law also introduces the concept of advisory services, which banks are now obligated to provide for free, ensuring clients receive informed guidance regarding their financial decisions.