During the meeting of October 4, 2018, the Saeima approved amendments to the Consumer Protection Rights Law providing for a series of changes in non-bank loans or issuing of the so-called "quick loans", encouraging the comprehensive evaluation of the consumer's solvency, limiting credit costs and introducing a ban on advertising.
Along with the amendments made to the law, banks and non-bank lenders will be able to obtain via credit information offices full information on the obligations of the consumer that will significantly improve the quality of solvency assessment of the consumer. It is important to note that credit information offices have access to information not only on the particular consumer’s credit obligations, but also on consumer's outstanding payments for electricity, telecommunications services, etc.
Also, in future, when assessing the consumer's repayment ability, the lender will only be allowed to rely on the information provided by the consumer in cases where the information provided is sufficient and documented. Namely, the lender will have to verify the accuracy of the information provided by the consumer, including the size of consumer's income. Until now, the consumer’s self-declared income was sufficient creating the risk of taking into account the unofficial income of consumer or completely miscalculating the consumer's income level in the solvency assessment.
The law also provides for stricter limitation on loan costs In accordance with the decision of MPs, the total loan costs may not exceed 0.07% per day or 25% per annum.
In order to limit the amount of the sum to be paid out to the consumer and repayable as a lump-sum, it has been stipulated that the total amount of the loan in the future may not exceed 50% of the national minimum monthly salary, and it is prohibited to prolong the repayment term more than twice. These conditions shall apply to loans taken for a period of up to 30 days and shall provide for the loan repayment as a lump-sum.
Meanwhile, if the loan amount should be 100 Euro or more, the lender will be obliged to obtain a statement of income from the State Social Insurance Agency or the State Revenue Service prior to the issuance of the loan.
Similarly, a statutory prohibition of loan advertising, with the exception of certain cases, for example, in premises where the lender carries out his economic activity, on the internet website, in a mobile application or online system. Similarly, the lender will be entitled to provide information and promote his brand name.
Along with the amendments, the law has extended the statutory period of up to 3 years during which the consumer is entitled to bring legal proceedings and ask for a reduction in the interest rate to the statutory interest, as well as a relief from default interest payments. In accordance with the law, such claims shall be made by the consumer in the event if the consumer's ability to repay the loan has not been sufficiently assessed.
Amendments to the Consumer Rights Protection Law will enter into force on 1 January 2019, except for the provisions on loan costs, which will enter into force on 1 July 2019.