On February 10, 2020, the Central Bank of the Republic of Turkey issued a notification on published in the Official Gazette. The notification was issued by the Central Bank of the Republic of Turkey in order to increase predictability and transparency in the transactions of banks with their commercial customers, to prevent excessive charges by banks against their customers and to determine the types, qualifications and maximum amounts or rates of the fees that may be charged for the products or services offered by banks.

After more than 4 years of its validity, the notification has been subject to some amendments published in the Official Gazette on June 28, 2024.

Pursuant to Article 1 of the Notification No. 2024/16 Amending the Notification on the Procedures and Principles Regarding the Fees to be Charged by Banks to Commercial Customers, the Central Bank of the Republic of Turkey has amended the third paragraph of Article 11 of the previous Notification.

Prior to the Amendment, Article 11 of Notification No. 2020/4 stipulated that banks were obliged to accept the request of commercial customers for early repayment of the entire loan maturity, provided that the prepayment fee for fixed-rate loans denominated in Turkish lira did not exceed the rate determined on the basis of the remaining maturity and a certain calculation formula. For foreign currency-denominated or foreign currency-indexed fixed-rate loans, the prepayment fee was determined on the basis of a fixed rate and the remaining maturity. For loans with variable interest rates, it was stipulated that a prepayment fee of up to two percent of the prepaid amount could be charged.

With the new temporary regulation, for loans extended before March 1, 2021, if commercial customers request early repayment of the entire loan term, banks will be obliged to accept this request.

For Turkish lira-denominated loans, the prepayment fee cannot exceed one percent of the prepayment amount for loans with a remaining maturity not exceeding 24 months, and two percent for loans exceeding 24 months. For loans denominated in foreign currency or indexed to foreign currency, these fees will be increased by one percentage point.

While the old regulation imposed limitations based on a specific calculation formula for Turkish lira-denominated fixed-rate loans, the new temporary regulation includes fixed rates and fees based on the remaining maturity.

While the old regulation stipulated a two percent prepayment fee limit for floating rate loans, the new regulation does not include a provision for such loans. Therefore, such loans will be subject to general prepayment limitations.

The second subparagraph added to Provisional Article 5 stipulates that for loans extended between March 1, 2021 and June 30, 2024 (), if commercial customers submit a request for early repayment of the entire loan to the banks, the banks cannot reject the request.

There are some differences between loans extended before March 1, 2021 and loans extended between March 1, 2021 and June 30, 2024.

To give an explanation briefly about the differences, For Turkish lira-denominated loans extended before March 1, 2021, the prepayment fee has simple percentage limits depending on the length of the remaining maturity. While there are limits of one percent for loans with a remaining maturity not exceeding 24 months and two percent for loans with a remaining maturity exceeding 24 months, the calculation method has become more complex for loans extended after March 1, 2021 until June 30, 2024.

It is regulated that the payment fee may exceed up to two percent for loans with a remaining maturity not exceeding 24 months for loans disbursed within the aforementioned date range; for loans exceeding 24 months, it may exceed the amount of the fee calculated by adding one percent for the portion of the remaining maturity exceeding 24 months for each year.

As a result, the amendments contained in Notification Numbered 2020/4 entered into force after being published in the Official Gazette on July 1. We would like to draw attention to the fact that it will be useful to examine the temporary articles added to the relevant notification in case commercial customers wishes to pay their loan payments in an early period.