This is the third proposal of changes on the payday loans and installment loans market, which may result in the disappearance of more than 1/3 of companies from the non-banking industry. The reason for this is significant cost restrictions and the manner of calculating them, which the Ministry of Finance wants to introduce. Learn more at goma-organic.org
The proposal assumes that the cost of the loan, which is not interest-based, may amount to a maximum of 25% and after each year of the contract no more than 30%.
In the entire duration of the loan, the maximum cost may not be higher than 100% of the amount paid out.
The new idea hits the payday market
What is worse, there was a proposal to sum up the costs of loans within 120 days, which means that extending a 30-day loan for another same period will be treated as the cost of one loan.
This contradicts the intention of payday loans, the sense of which is that they are granted for short periods and later possibly extended. The introduction of such a record will cause that we will get another payday loan after 120 days because the loan company will not be able to charge us for the next quick loan.
The idea is that companies would not be able to combine and insert additional fees that seemingly are not related to the loan, such as SMS, cash delivery and life insurance.
Supervision of payday loans
The desire to create a register of loan companies under the wings of BIG LENDER is also a big puzzle. This institution has previously dealt with the regulation of cooperation between consumers and entrepreneurs.
The institution conducted research and issued an opinion in given aspects of functioning, and never supervised any industry from A to Z. The idea is probably to save the next duties of the PFSA, which has recently got a ticking bomb, which is Bureau.
New changes are bad for customers
The idea of the ministry strongly promotes installment loans for longer periods, which are often worse and, above all, more expensive solutions for clients. With such activities, we will probably come back to the situation where on the non-banking market there were only a few institutions granting loans without BIK. As you know, high competition affects the benefit of customers, so it is the responsibility of the legislator to defend it.
The payday loans industry is needed, as demonstrated by the popularity of companies. For many customers, this is the last opportunity to receive cash without detailed verification, and most importantly really in no more than 15 minutes. Unlike banks or installment lending companies, you can get up to USD 100, which is exactly what we sometimes need, and not big money, from which we must pay interest in installments later.
What will be the consequences of changes in payday loans?
The introduction of such ideas will primarily reduce the number of lending companies, and not customers in need of such loans, the shortage of supply in this industry will move it to the gray economy. What will affect the problems of customers, because what about the debt recovery by loan companies, which are under the watchful eye of many state authorities, it is conducted legally and humanely?
Of course, we suggest to the Ministry of Finance to think hard about the idea. The representatives of FPF and FFP, i.e. the two largest associations of non-bank loan companies, postulate for the same. In the next article, we will present the positions and proposed changes made by these two environments.