On October 11 last year, the so-called anti-usury act. The intention of its creators was to be a whip for lenders who impose huge interest and curb these practices. At this moment, the day on which its most controversial regulations will take effect is approaching rapidly, it will be exactly March 11, 2016. Many, because of opposition from loan companies and doubts of financial specialists regulations regarding the establishment of the maximum limit of non-interest costs.
Pursuant to the provisions of the Act, these will be all costs incurred by the customer in connection with the conclusion of the consumer loan agreement (popular payday loans) except for the sum of interest. Therefore, we can include such costs as: application fees, home service costs, the sum insured in the event of a loan being not repaid. In view of the above, loan companies will no longer be able to use a smart catwalk convincing the customer that he is getting a cheap loan and after adding the additional fees he is actually supposed to return the amount several times higher than what he borrowed. The provisions of the Act were designed in such a way as to defend the consumer against this in the maximum way.
Therefore, the loan company will be able to collect from its client a sum of fees that cannot exceed 55% of the value of the loan granted. In addition, the total amount of non-interest charges may not be higher than 100% of the value of the loan granted.
There will be fewer customers
Even during work on the final shape of the bill, many lenders sent appeals to our parliamentarians to give up such restrictive provisions of the act. However, their hopes for change were quickly dispelled by the then Deputy Minister of Finance in the PO-PSL government. From the parliamentary rostrum, she spoke harshly that loans in their current form were spoofing.
At this point, however, the loan companies still stand by their position and claim that the changes that will take effect in March will lose primarily customers themselves.
According to preliminary estimates of loan specialists, as a result of the changes, around 30% of customers will not have access to loans.
Who will be in this group? Undoubtedly, we can distinguish two extreme subgroups here. The first of these are people who incurred their obligations for a relatively longer period of time, usually exceeding 2 years, and the second situation of customers who are interested in the so-called micro loans, i.e. small amounts borrowed for a very short repayment period.
Analysts’ calculations are inexorable and indicate that this type of loan, in combination with the new regulations of the Act, will simply be unprofitable for loan companies. It was established that the cost limit depends on the duration of the loan agreement, in a word the company that lends for short periods will not earn much. The highest profitability will be for loans granted for a period of one year to a maximum of two years. After this period, the profitability of your business decreases, as the maximum fees will not be able to exceed 100% of the value of the loan itself.
In this arrangement, experts forecast that the market for installment loans concluded up to a maximum of 12 months will develop. However, at this point, we can see a growing range of practices of a number of loan companies that raise their prices to the limit set by law (some groups of companies offered their products cheaper than the maximum fee threshold specified in the new regulations).
Interestingly, apart from the complaints and fears we hear from loan companies, there are also positive voices in connection with the introduction of new regulations. It should be emphasized that these voices come from a company that has basically become synonymous with payday loans and colossal loan fees. Provident, through his spokesperson, claims that the introduction of the new rules was a necessary compromise that would benefit the entire loan market.
Faster execution of outstanding loans?
Opponents of the introduced changes additionally claim that the new regulations will also lose people who have problems with timely repayment of their obligations. By amending the Act, there is no longer the possibility of so-called rolling loans (until now we have been able to take on an additional loan over and over again). Debt collection fees will also be reduced.
This will result in a reduced time during which loan companies amicably seek to agree with the client to return the loan. Undoubtedly, there will be more cases that will be immediately directed to electronic proceedings and therefore a larger group of people will be knocked no longer by the loan company advisor, but by the bailiff.
Last harvest days
Currently, we can see increased advertising activity on the part of loan companies, which encourage customers to take advantage of the promotion and warn that they may not receive such good conditions soon. In addition, the forecasts say that the market for short-term loans will diminish and, as a result, competition will also be more intense. This aspect can also be presumed to affect the increase in spending on marketing activities on the part of lenders.