From today, the amended Consumer Credit Act, popularly known as the Anti-usury Act, applies. The introduced regulations are to increase the level of protection for consumers using the services of loan companies that are not supervised by the PFSA. The new provisions will primarily affect companies granting the so-called online payday loans, i.e. quick short-term loans, the granting of which is not preceded by a check on the customer’s creditworthiness.
Pursuant to the provisions currently in force, the interest rate on a loan granted by a bank, credit unions or any loan company may not exceed four times the amount of the Good Credit loan per year. It is currently 2.5 percent, so the maximum interest rate for such a loan is 10 percent. per year.
Dam for excessive fees
The source of real profits for lending companies that are not banks or cooperative savings and credit unions are, however, not the interest mentioned, but the other costs associated with the grant of money, i.e. fees for:
- consideration of the application,
- granting a loan,
- mandatory arrival of a company employee to the client’s apartment,
- extension of repayment date, etc.
The amount of these additional fees is not limited in any way by law, so it is not uncommon for lending companies to receive remuneration in excess of the amount of the commitment given.
The legislator decided to end this practice
Amended Art. 36a of the Consumer Credit Act stipulates that in the first year the loan company will be able to charge additional consumer fees (and thus not resulting from interest) in the amount of up to 55 percent. loan value. If the repayment period is longer than 12 months, then, regardless of its duration, the total sum of non-interest charges collected may not exceed 100%. loan value.
The legislator introduced a special algorithm to determine the maximum amount of non-interest loan costs.
The algorithm itself is information for loan companies rather than their clients (it is hardly readable for non-professionals), however, that the legislator finally limited the arbitrariness of companies that violated the interests of clients (they used, for example, the practice of collecting commissions for examining the application and in the event of its rejection did not return money), deserves recognition.
The new regulations include a definition of non-interest loan costs. These are all costs that the consumer incurs in connection with the consumer credit agreement, excluding interest.
End of rolling
The new regulations solve one more problem in the quick loans sector: incurring new debt to pay the previous one, then the next one (new fees are charged to everyone), because the consumer is no longer able to pay the next installments. The client can’t see the borrowed money, so he doesn’t physically gain anything. Therefore, some economists believe that these are fictitious, existing only on paper, loans. This is popularly called debt rolling and leads in most cases to a debt loop.
The legislator solved the problem in such a way that each subsequent loan granted for the repayment of the previous one within 120 days of the payment of the original payday loan will not be included in the total loan amount. In turn, the related fees will be included in the cost limit.
Therefore, if the company charges the maximum possible fees for the first loan, then it will not earn anything on each subsequent one. This will probably discourage companies from deliberately proposing to clients to incur further obligations, which have only been enriched by lenders so far.
Will the new rules change the market?
The new regulations will additionally protect the clients of loan companies from the necessity of paying unjustified fees for the use of money. At the same time, customers still need to be wary and read contracts and ask questions about all provisions that are unclear to them. It must be remembered that no regulations will protect against a lack of prudence.
At the consultation stage of the bill, there were voices from the environment that the introduction of regulations in the proposed shape would lead to 1/3 of companies disappearing from the market. It is possible, however, only those who earned not on good products but on high borrowing costs will not adapt to the new legal reality.
Those who acted honestly should not be afraid of doing business in the new legal reality. The amendment should allow for some kind of self-cleaning of the quick cash loan market – not only for the benefit of customers but also for honest companies.