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Tuesday 22.08.2017 | Name days: Rudīte, Everts
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Latvian Economy Ministry stands alone in fight with fast credits

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Daniels Pavluts

Daniels Pavluts

Prohibition of aggressive advertisements is the only issue the involved sides had been able to agree upon. Responsible officials and representatives of the non-banking creditors are unable to agree on other important questions.

Questions that relate to the matter of issuing loans cause the largest arguments. It is still not decided whether loan services should be allowed until 20:00 or 22:00 of the day. The issue of the assessment of a client’s solvency remains open as well. Everyone can agree that this is necessary. However, this is not financially beneficial for companies to do so is the loan does not exceed 100 LVL, De Facto programme of LTV reports.

The parliament has ended up in an interesting situation. It has decided to have the cap of penalties increased to 10%. Entrepreneurs of other industries made it look as though they did not notice this. But then, as though suddenly realizing what happened, understood that the changes will affect them as well. Chairman of the Latvian Trade and Industry Janis Endzins had this to say: “We noticed this when it was a bit too late – when the Saeima had already supported amendments to the Civil Law in the second reading. It was then when we understood that this will not stand. We then concluded that all this had been with a name “combating non-banking creditors”. In reality, however, it is a cure that is poison for the whole of all businesses.”

Right now it seems that the Latvian Economy Ministry is now all alone in this fight. While it was certain that the whole coalition was expressing support in limiting fast credits just recently, the current situation suggests everyone is looking for arguments why this should not be done.

Unity’s Saeima faction Chairman Dzintars Zakis is certain that “one of the politicians wanted to become popular and now wants to do it [approve changes] quickly. Things that are done in haste are rarely of high quality”. Non-party Saeima deputy Klavs Olsteins said he does not want “to support regulations that affect the whole of the finance industry and create problems for its future”.

One month ago, Finance Minister Andris Vilks had told De Facto that the monitoring of fast credit companies should be handed to the Finance and Capital Market Commission. But when this matter had been reviewed by the government this May, the Finance Ministry suddenly backed away from its opinion and decided to keep the old order.

BNN previously reported that member of the Latvian Non-Banking Creditors Association have agreed to stop issuing credits to persons under the age of 18 and 19 starting from February 11, 2013. This restriction will remain in force until the state forms a united credit registry, as well as provides the opportunity for creditors to inspect a person’s level of income.

“The total proportion of 18 and 19-year-old borrowers is small (5% of the total number). However, given that specific cases can create a negative impact on society, and the fact that this age group is rather vulnerable, members of the association decided to set a temporary restriction – until the state creates a credit register, giving non-bank creditors legal rights to check the young people’s solvency,” – notes Fromane.

It was also previously reported that one of the most rapidly growing consumption credit areas in Latvia is the so-called fast credits. These credits cannot be applied for by sending a text message. They are usually used to overcome short-term financial difficulties. Unfortunately, facts show that the fast credit industry is going through a poorly regulated increase, which creates serious risks to a number of Latvian credit consumers – ending up in long-term debt obligations because of relatively small loans, as said by Economy Minister Daniels Pavluts.

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