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Monday 15.10.2018 | Name days: Hedviga, Helvijs, Eda
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Fast loan industry asks Latvian president not to announce stricter rules for industry

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUAlternative Financial Services Association of Latvia has sent a letter to Latvian President Raimonds Vējonis, detailing a request to return to the Saeima amendments to Consumer Rights Protection Law for a repeated reading, as confirmed by the association.

Companies part of the non-banking lending industry explain the request, saying that the parliament’s intended changes would effectively put an end to fast loans in the country. The non-banking lending sector’s companies also add that changes were developed without any analysis of their possible effect on consumers, the market and economy as a whole. The association also notes that amendments are mutually exclusive and were poorly prepared.

«If a consumer wants to borrow a EUR 100 loan for 30 days the maximum amount a lender will be able to charge, in accordance with new requirements, is EUR 2.1. You don’t need to be a financial analyst to understand that EUR 2 neither cover the cost of using capital nor data check of the client’s solvency, or even employees’ wages and monitoring fees to the state budget. This means short-term loans will cease being available in Latvia. There is no point in analyzing other changes approved in the pre-election period. This includes the ban on consumer loan advertisements, which is absurd if there is no way to present your product on the market,» says head of Alternative Financial Services Association of Latvia Gints Āboltiņš.

BNN had previously reported that intended amendments state that consumer loan contracts signed for up to 30 days and provide for repayment of the loan in a single payment are not allowed to exceed 50% of the country’s minimal wage – EUR 215. It is also planned it will not be allowed to extent repayment for more than two times. This will not apply to cases when loan repayment includes a specific schedule.

According to data from Latvia’s Commercial Banks Association, there were approximately 170,000 debtors in the country in August whose debts exceeded EUR 200. Debts of 40,000 residents exceeded EUR 2,000. Debts of nearly 35,000 residents ranged between 2,000 and 5,000. The debt threshold for residents to declare insolvency is EUR 5,000. Initiation of insolvency procedure requires the debt to be EUR 1,200. Sworn court bailiffs currently have approximately EUR 188,000 different debt enforcement cases.

It is estimated that around 10,000 debtors are ones who borrowed money from fast loan firms. Deputy Valdis Kalnozols from Union of Greens and Farmers said fast loan firms have done considerable damage to residents – because of debts, the number of residents who have left the country continues increasing. Companies continue going bankrupt. The deputy says fast loans cost the country losses worth EUR 4 billion to EUR 10 billion every year.

«We get the feeling legislators have no idea what the approved amendments mean for the industry. It is clear companies will not be able to work under such conditions and will be forced to cease operations. This means we can expect large litigations against the state regarding violations of proportionality and legal arbitration violations. We hope it will be possible to rationally discuss everything possible to improve in regulations without public pressure. This is why we have asked the president to offer such an opportunity. Unfortunately, this was not possible during the pre-election period,» said Āboltiņš.


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