The Alternative Financial Services Association of Latvia: Ministry of Economy needs to give appreciation for upcoming changes in non-bank lending industry
President of Latvia Raimonds Vejonis has announced amendments to Consumer Protection Laws. The changes are controversial as they exclude short-term loans from the consumer lending market. These have so far been provided by non-bank lending companies, says Gints Aboltins, Head of the Latvian Alternative Financial Services Association. The Association asks the Ministry of Economy, as an industry policy maker, to assess the changes adopted and to provide its assessment of their impact on the consumer and financial services market as a whole.
In the pre-election climate, with the regulation of the non-bank lending industry under the spot light, politicians are trying to attract attention. Parliamentary candidates have provided a radical proposal for limiting the sector – without analysing the impact of the changes on the market and the consumer. We are currently seeing the adoption of conflicting changes in regulation and amendments which are also anti-constitutional. There is a real danger of large-scale corporate litigation against the government for limiting business within Latvia. Until the changes take effect (in about two months) this time should be used to correct pre-election populism and take a rational look at the situation, says Gints Aboltins, Head of the Latvian Alternative Financial Services Association.
The Association reiterates that, as a result of the changes adopted, short term loans will no longer be available to consumers in Latvia. Commercial banks traditionally issue loans of more than €500 in the consumer credit segment. Non-bank operations were able to issue smaller loans due to developed technologies. However, amendments to the Consumer Protection Law stipulate that, in future, with a €100 loan for 30 days the maximum the non-bank lending industry will be able to apply is 2.1 euros. This state-imposed price limit means it is not viable for companies to offer short term loans, taking away a valuable facility from consumers.
At the discretion of the Association, the Ministry of Economy, responsible for non-bank lending industry policies, should provide its assessment of the situation. Only then will we see the real impact of the amendments on the consumer, the market and on competition in the financial services industry.
Published: 16.10.2018, by The Alternative Financial Services Association of Latvia