Regulations on Savings Finance Companies Have Been Published.

Under the Omnibus Law, the saving finance companies, which have become very popular especially in recent years, offering interest-free financing services, to which participants apply in order to meet their financing needs to purchase residences and vehicles.

Definition
The savings finance activities carried out by savings finance companies are defined in the Omnibus Law as follows:

• Savings Finance Activities: To save money for a certain period, to provide financing to clients and to manage the collected savings, in accordance with the principles of interest-free financing, for the acquisition of residences, roofed workplaces or vehicles, under condition that the conditions set out under a contract are satisfied.

Incorporation
For the incorporation of savings finance companies, it is provided that (i) the phrase “Savings Finance Company” must be included in the commercial title, (ii) the Company's capital must be at least 100 million Turkish Liras, and (iii) other requirements for incorporation set out under the Law for other types of financial institutions must be met.

In addition, savings finance companies are obliged to reserve half percent of the organization fees they have collected as separately from income accounts, which is to be paid to savings account owners in case of liquidation.

Prohibited Activities
In accordance with the Omnibus Law, savings finance companies are prohibited from (i) financing non-deductible debts arising from the acquisition of residences or vehicles, (ii) providing financing outside of savings finance contracts, (iii) lending to third parties, and (iv) acquiring shares of partnerships.

In addition, savings finance companies will not be able to use words and phrases that may create the impression of a bank, as well as the word "participation", and will only be able to finance the purchase of residences, roofed workplaces or vehicles registered in the country.

Merger, Transfer, Spin-off and Liquidation
Mergers, transfers, spin-offs and liquidations of savings finance companies are subject to the supervision and approval of the BRSA. It is set out that, in terms of liquidation, savings finance companies shall fulfill all obligations, including financing obligations towards their customers, and in terms of mergers, transfers, spin-offs and voluntary liquidations, savings finance companies shall comply with the submitted plan and that such transactions shall not cause any damage on the rights and interests of the customers.

Measures that can be implemented by the BRSA:
In case of financial deterioration and risks regarding savings finance companies, such as the danger of assets being unable to cover the obligations, the deterioration of interests and balances between income and expenses, and the emergence of risks against the financial system in terms of trust or stability, it is set out that BRSA may implement the necessary measures.

Savings Finance Agreement
Savings finance agreement is defined as; “an agreement that gives the customer the right to benefit from financing for the acquisition of residences or vehicles and that accords the company the obligation to manage the savings amount that accrued and that belongs to the customer, to pay it back and to provide financing and the right to collect an organization fee, on condition that conditions determined beforehand, in relation with a specific amount of savings and period, are satisfied, drafted in accordance with the principles of interest-free financing.” Accordingly;

• The right of withdrawal may be exercised within 14 days following the execution of the agreement and the right of termination may be exercised until the end of the savings period.
• It can drawn up in writing or remotely by using remote communication tools.
• If the right of termination is exercised, the company is obliged to pay back the total amount of savings, except for the organization fee, to the customer within the period determined by the BRSA.
• Savings finance agreements cannot be terminated unilaterally by the company, except in the event that the customer does not fulfill his obligations under the agreement.

Savings Finance Activities
Per the Omnibus Law, Companies are required to draw up separate savings and financing plans for each of their customers or customer groups and manage the liquid amounts associated with these.

At the same time, savings finance companies are obliged to separate their savings fund pool accounts from other accounts and operate in accordance with interest-free financing principles.

Sanctions
Sanctions are generally set out in relation with any violation of activities, non-return of savings following the exercise of the right of withdrawal/termination and unauthorized activities:

• In case of violation of the savings finance agreement and the savings financing activities, an administrative fine will be imposed and
• A prison sentence and a judicial fine are also provided for those who prevent the repayment of their savings, in case the customer exercises the withdrawal/termination rights under the savings finance agreement, and those who engage in unauthorized savings finance activities.

In addition, the BRSA will be able to decide on liquidation of companies that are subject to the Law and that engage in unauthorized activities.

Revocation of Operating License and Liquidation
The Omnibus Law provides that, especially in cases in which stability regarding liquidity is not achieved and measures requested by the BRSA are not adopted, the operating license of savings finance companies may be revoked and these companies may be liquidated.

Adjustment Process
Per the Omnibus Law, the companies that are currently engaged in savings finance activities are now obliged to;

• Apply to the BRSA within one month from the date of entry into force of the amendments,
• At the time of application, submit a plan showing that they will bring their status into compliance with the provisions of the Law no later than six months or that they will be liquidated without any prejudice to the rights and interests of the customer; and
• If the plan is deemed appropriate, carry out the necessary actions within the specified time periods.

For savings financie companies that continue their activities without filing an application to the BRSA within the above-mentioned period of one month, the provisions regarding unauthorized activities will apply.

Please click here to access the full text of the Omnibus Law.

Nur Duygu Bozkurt Kadirhan, Senior Associate
Burak Batı, Associate
İrem Tanık, Legal Intern