The Law Amending Certain Laws and Statutory Decrees No. 7247 (the “Omnibus Law”) has been published in the Official Gazette dated 26 June 2020 and numbered 31167 and entered into force on the same day. The Omnibus Law has altered various provisions of certain laws regarding banking and electronic communication legislation. Most importantly, the Omnibus Law has introduced electronic agreements to be conducted by and between financial institutions and/or electronic communication service providers and their customers via digital platforms in order to facilitate the customers’ contracting process, as stated in the reasoning of the Omnibus Law.
This Monthly Updates aims to introduce the novelties brought by the Omnibus Law especially on electronic agreements, which shall be used for establishing relationships by and between financial institutions and/or electronic communication service providers and their customers and highlights other changes with respect to certain financial matters.
Major Changes Introduced by the Omnibus Law
- Electronic Agreements Regarding Financial Activities and the relevant Regulatory Authorities
By means of enactment of the Omnibus Law; (i) the Banking Law No. 5411; (ii) the Bank Cards and Credit Cards Law No. 5464; (iii) the Financial Leasing, Factoring and Funding Companies Law No. 6361; (iv) the Capital Markets Law No. 6362; and (v) the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions No. 6493 have been amended along the same purpose. According to the former versions of the abovementioned pieces of legislation, the only way to make an agreement by and between the financial institutions and customers was to execute such agreement in writing. However, with the virtue of the Omnibus Law, (i) agreements with regards to the banking operations; (ii) agreements that regulate the relationship between debit or credit card issuers and their customers; (iii) financial leasing agreements; (iv) factoring agreements; (v) funding agreements; (vi) agreements that regulate the relationship between investment companies or portfolio management companies and their customers; and (vii) framework agreements with respect to the payment services can also be conducted in alternative forms further to be detailed below.
Within the scope of the Omnibus Law, such agreements can be executed (i) in writing; or (ii) via using telecommunication instruments distantly; or (iii) whether distantly or not, by using the methods which the relevant regulatory authority has determined to replace the written form and which enables to verify the customer’s identity through an information technology device or an electronic communication device. Except for (i) agreements that regulate the relationship between investment companies or portfolio management companies and their customers; and (ii) framework agreements with respect to the payment services, the Banking Regulation and Supervision Agency (the “BRSA”) shall be authorized to determine the form to be used by the customers instead of a written form. Other than the foregoing agreements, the procedures and principles for regulating the methods of executing agreements shall further be set forth by the BRSA as well.
The Capital Markets Board shall be in charge as the relevant authority for agreements that regulate the relationship between investment companies or portfolio management companies and their customers and the Central Bank of the Republic of Turkey shall be responsible as the relevant authority for framework agreements with respect to payment services.
- Electronic Agreements on Electronic Communication
Within the scope of the Omnibus Law, a few amendments in a similar nature with the previous explanations has been made on the Electronic Communication Law No. 5809 (the “Electronic Communication Law”), in order to enable the drawing-up of subscription agreements, which shall be conducted when a customer subscribes to electronic communication services, electronically. Before the promulgation of the Omnibus Law, the Regulation on Consumer Rights in Electronic Communication Sector foresaw the execution of subscription agreements electronically, contrary to its primary legislation, namely the Electronic Communication Law which specified that subscription agreements could only be executed in written form. The Omnibus Law has eliminated this contradiction between the primary and the secondary legislation. Accordingly, as per the revision to Article 50 of the Electronic Communication Law, subscription agreements can be drawn up (i) in writing; or (ii) in electronic environment.
Agreements to be executed electronically shall be conducted in a way that allows the customer’s identity to be verified and additionally, the methods to be determined by the Information Technologies and Communication Institution (the “BTK”) shall be followed during the execution process. Furthermore, the BTK shall be responsible for issuing procedures and principles of execution of the subscription agreement electronically. Besides, it is also possible for customers to terminate their agreements electronically with the virtue of the amendment made on Article 50 of the Electronic Communication Law.
- Widening the Utilization of the Turkish Identity Information Sharing System
The Turkish Identity Information Sharing System (the “KPS”) is an online system that allows governmental authorities and other legal entities to constantly access the citizen’s birth certificate and place of residence records [which are kept in the central database by the General Directorate of Population and Citizenship Affairs (the “General Directorate”)], on a current and secure basis. In the earlier version of the Population Services Law No. 5490, the identity information and the place of residence records were shared with (i) insurance and pension companies; (ii) banks; (iii) the Risk Center of the Banks Association of Turkey; (iv) companies that provide information sharing services; and (v) financial leasing and funding companies. Following the Omnibus Law, such records shall also be shared with (i) intermediary institutions; (ii) portfolio management companies; and (iii) payment service providers. With the Omnibus Law, all of the aforementioned companies shall be obliged to take necessary administrative and technical precautions regarding the proper usage of the KPS. Accordingly, the General Directorate shall be responsible for supervising the aforementioned companies on taking such precautions.
Alongside with the other amendments of the Omnibus Law, a provisional Article has been added to the Law on Regulating Public Finance and Debt Management No. 4749 (the “Public Finance and Debt Management Law”), in order to meet financial needs of public bodies and institutions and state-owned banks which were affected adversely by the Covid-19 outbreak. Under normal circumstances, the limit of the special category state domestic borrowing notes (özel tertip devlet iç borçlanma senedi) issued for on-lending shall not exceed 3% of the initial budget appropriation, which is determined in the relevant legislation as TL 1,082,021,197,000 in total. As per the Provisional Article 32 of the Public Finance and Debt Management Law, the percentage has been increased up to 5% for the financial year of 2020.
By means of the Omnibus Law, digital onboarding has been introduced into our lives which legalizes the practice of signing up for financial services online. Within the scope of the arrangements made especially on the electronic agreements, it is aimed to prevent from any possible discrepancy about conducting the electronic agreements. However, it is also clear that customers are expected to sign such agreements via using biometric technologies, such as face recognition, biometric signatures etc. Thus, it should be noted that the secondary legislation, which is currently awaited in order to regulate procedures and principles regarding execution of the electronic agreements, needed to be prepared in consideration with potential data protection issues that may arise.