CZECH REPUBLIC Law and Practice Contributed by: Ondřej Mikula, Jan Šovar and Markéta Klabouchová, FINREG PARTNERS
Crowdfunding Lending-based crowdfunding services are regu - lated under the Crowdfunding Regulation, which requires providers to obtain a licence and grants investors rights, such as a pre-contractual reflec - tion period to revoke an investment offer. 4.2 Underwriting Processes Underwriting processes vary based on the lend - er, borrower and type of credit. AML/CFT Legislation All financial entities, including professional lend - ers and loan intermediaries, must comply with the AML/CFT legislation of the Czech Republic. Therefore, obligations such as customer identi - fication and due diligence and risk assessment of the business relationship apply in the under - writing process. Consumer Lending As mentioned in 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities , unlike commercial lending, consumer lending activities are highly regulated. A key obligation in underwriting is assessing the creditworthiness of a potential borrower using reliable information, which the consumer must provide (eg, financial situation). Lenders typically also use external databases (eg, the Bank Customer Information Register) for this assessment, often relying on automated profiling and decision-making tools. To manage banking risks, banks must also follow strict prudential rules on capital adequacy and exposure, based on Basel Committee recom - mendations and EU regulations.
service provided. Additionally, all investment firms must act in the best interest of their clients.
4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities
There are significant differences in the regulation of commercial lending (including to SMEs) and consumer lending in the Czech Republic. While commercial lending does not generally require a licence, consumer lending is highly regulated. Regardless of the financed entity, both lending and loan intermediation are designated activities under AML/CTF legislation in the Czech Repub - lic, subjecting lenders and intermediaries to its requirements. Commercial Lending Commercial lending in the Czech Republic is not subject to a special regulatory regime unless provided by banks or credit institutions. It is pri - marily regulated by the Civil Code. While parties to a loan contract can freely agree on terms, they cannot deviate from certain legal provisions that protect the “weaker party” . Consumer Lending Consumer lending activities, including credit provision and intermediation, require an appro - priate licence. The Consumer Credit Act ensures a high level of consumer protection by setting rules on pre-contractual and ongoing informa - tion, contract form and credit checks. It requires disclosing information to help consumers com - pare different offers and make informed deci - sions. The Consumer Credit Act also grants con - sumers rights like early repayment and the right of withdrawal.
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