Banking and Finance Law

The type and rate of interest, the cost items, the conditions for early repayment, and the consequences applicable in the event of default are the most important parts of the agreement. The effect of these items on the total cost must be calculated.

The security structure must also be assessed. The scope of securities such as mortgages, pledges, suretyships and promissory notes, and which debts they secure, must be stated clearly.

If the agreement contains provisions granting a unilateral right of amendment, their validity is open to challenge. Such provisions are subject to stricter scrutiny in consumer loans.

The consumer may repay all or part of the loan debt before its due date. In that case, a corresponding reduction in interest and costs is mandatory.

For fixed-rate loans, an early repayment penalty may be provided for; this penalty is limited to the upper cap set by legislation. The position is assessed differently for variable-rate loans.

A written statement of the early repayment calculation should be requested from the bank. An allegation of a calculation error can only be established by examining that statement.

In consumer loans, if a cost is charged to the consumer that does not correspond to a service or is not substantiated by documentation, a refund may be claimed. The claim is calculated from the agreement and the account statement.

If the value of the dispute is below the monetary threshold set by law, an application must first be made to the consumer arbitration committee. Claims above the threshold are brought before the consumer court.

Commercial loans are assessed separately. Where a loan is taken in the capacity of a merchant, the protections of consumer legislation do not apply.

If the records are believed to be incorrect, a written application should first be made to the relevant institution. The application must clearly state which record the error concerns.

If the debt has been paid but the record has not been updated, a correction may be requested. Documents showing the payment should be attached to the application.

Inaccurate personal data also gives rise to a right of application under data protection legislation. This route can help speed up the correction.

Under Article 583 of the Turkish Code of Obligations No. 6098, a suretyship agreement is not valid unless made in writing and unless the maximum amount for which the surety is liable and the date of the suretyship are stated. These elements must be written in the surety's own hand.

The surety's intention to act as a joint and several surety must also be stated in the same form. The absence of any one of these elements may result in the suretyship being invalid.

Under Article 584 of the Turkish Code of Obligations, one spouse may act as surety only with the other spouse's written consent, unless a judicial separation has been ordered or a right to live apart has arisen by law. Certain suretyships relating to enterprises registered in the trade registry are excluded from this rule.

A suretyship is a security accessory to the principal debt; if the principal debt ends, the suretyship also ends. The surety may raise the defences available to the principal debtor.

A bank guarantee letter, by contrast, creates an independent obligation. Since payment is envisaged to be made upon the beneficiary's demand, objections arising from the underlying relationship cannot, as a rule, be raised.

This difference directly affects the choice of security in commercial dealings. Where a letter is issued as final and unconditional, the payment risk is higher.

The proceedings are initiated on the basis of the mortgage deed. A payment order or an execution order is sent to the debtor, and if no objection is raised within the period, the matter proceeds to sale.

The debtor may argue that the debt has been paid or that it falls outside the scope of the mortgage. The competent authority to apply to, and the applicable period, vary according to the type of objection.

Objecting to the valuation matters for ensuring the sale price reflects the true value. The objection period is short, and if it is missed the valuation becomes final.

The bank first calls in the loan account, rendering the entire debt due. Proper service of the notice calling in the account matters for the validity of the subsequent enforcement proceedings.

The securities are then resorted to. For mortgaged immovable property, enforcement by realisation of the mortgage is used, and where a promissory note exists, enforcement proceedings specific to negotiable instruments are used.

The debtor may raise the unlawfulness of the account being called in, and of the amount claimed, through a negative declaratory action. In such an action, examination of the account statement is decisive.

A payment plan may be established through a protocol concluded with the creditor. The protocol must clearly set out the amount of the debt, the instalments, and the consequences of non-payment.

During the restructuring, the status of any existing enforcement proceedings must be addressed. Commitments regarding out-of-court collection of the proceedings or the lifting of attachments must be recorded in the protocol.

The sanction applicable in the event of breach of the commitment is separately specified. Care must be taken regarding the consequences of commitments given within an enforcement file.

The lessor retains ownership of the asset while transferring its use to the lessee. Throughout the term of the agreement, maintenance and insurance of the asset are, as a rule, the lessee's responsibility.

If the lease payments are not made, termination of the agreement and return of the asset come into question. Before termination, a warning notice must be sent and a further period allowed.

If transfer of the asset to the lessee at the end of the agreement is provided for, the transfer price and procedure are set out in the agreement. If the transfer does not take place, the nature of the amounts already paid becomes a matter of dispute.

Partners providing personal suretyship for a company's debts weakens the separation between the company's assets and the partners' own assets. Limiting the scope of the suretyship matters.

In intra-group loans, the transfer of resources between group companies must be documented. Undocumented transfers create tax and liability risk.

A security structure that places excessive burden on the company's assets narrows the possibility of obtaining new financing. For this reason, the order of priority among securities should be planned.

Disputes over loans and securities of a commercial nature are heard before the commercial court of first instance. Claims arising from consumer loans, however, fall within the jurisdiction of the consumer court.

In İzmir, the commercial courts of first instance and the consumer courts operate within the İzmir Courthouse. The question of jurisdiction is resolved according to the capacity in which the loan was taken.

For claims for a sum of money of a commercial nature, applying to mediation before filing suit is required as a procedural prerequisite to filing suit. Skipping this requirement results in the case being dismissed on procedural grounds.