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Friday 18.08.2017 | Name days: Liene, Helēna, Elena, Ellena, Liena

Income of EUR 1.73 can secure a fast loan worth EUR 930

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUA student of some vocational education institution, whose income is EUR 1.73, has managed to accumulate EUR 930 of debt from fast loan services. In addition, opposite to what companies had said previously, the loan was provided even when previous loan repayments had been delayed.

Ulvis had recently celebrated his 20th birthday. It is the age at which residents are allowed to be provided with fast loan services. He decided to turn to the most commonly advertised company – SMScredit. With a gap of one month, he took a total of EUR 155. He then paid back this money, as reported by De Facto programme of LTV.

Ilvis’ mother Sigita says «he had provided them with information that he works in a store. It was only for one month during summer. The wage was minimal, and this was made him think that he is eligible for a loan.» Then the situation changed. Ulvis no longer had a job. He also had no bursary as well, because it was summer break for students. But Ulvis account had nonetheless been added. Uldis took another EUR 50 from SMScredit. His debt slowly accumulated as he took EUR 5 and larger amounts as days went by. He took loans from Open Credit and Vivus in order to extend the repayment term for his existing loans. He also took a loan in order to buy a new phone. His mother does not know how he spent the rest: «With income of EUR 1.73, you can borrow as much as you want it seems!»

At the end of September, having accumulated debt, Uldis wanted to take a new loan. Multiple companies refused him. This is covered by the agreement among non-bank loan service providers. Two companies, however, had probably breached this agreement. One of them has ties to companies that had previously provided Uldis with loans. Both Ondo and creditON had provided Uldis with loans. By the end of October, Uldis, who has a bursary of nearly EUR 2, had borrowed a total of EUR 930. Because he has no ability to pay I back, his debt has reached EUR 1,259.74.

Current regulations state that in relation to loans up to EUR 427, loan service providers can rely only on the customer’s provided information. Uldis most likely hadn’t stated in his application that his monthly income is under EUR 2. It is likely that he had written a much larger amount. It is also likely that other people do the same thing. This means that trust is not enough. It is necessary to provide much stricter solvency assessment of fast loan service customers.
Director of Consumer Rights Protection Centre Baiba Vitolina notes that ‘the situation basically provides criminal liability if you provide false information to loan service providers. However, if people are prepared to cheat in order to acquire money when they really need it, it is possible that this regulation should be amended.»

Unlike other times, it has not been easy to arrange an interview with Latvian Non-bank Credit Association. When the association’s representative had found out about this particular case, the programme received an e-mail, saying that ‘this case should be reviewed by CRPC’. The association believes it is not necessary to amend regulations because of isolated cases.
After multiple phone calls and finding out that CRPC plans to review the solvency assessment regulation, the association finally decided to express its opinion. According to the association, the volume of issued loans has declined by one-third throughout the course of 2014. One of the reasons is that fast loan companies believe the information provided by their customers during solvency assessment. The association believes there is no need to make regulations even stricter, because honest people should not have to suffer. The head of the association Baiba Fromane notes that «the percentage of delayed payments continues to improve and the percentage of denied loans is over 50%. With that, it is possible to assess this information from the statistics shown by the industry in the past year. In regard to isolated cases when people act irresponsibly, we ask for no conclusions to be made in regard to all customers, of whom there are more than 100 thousand.»

Fromane is less talkative, it seems, when it comes to discussing how people can get new loans even without paying back the old ones. She invites the state to form a single credit register for non-bank loan service providers, similar to how it is with commercial banks. However, it is unlikely that this will help the system in any way, considering that information exchange has not been possible even within 4finance, Ulvis’ case serves as an example.


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