Proposals for amendments to the Consumer Rights Protection Law will be submitted to the appropriate Saeima committee for consideration before legislation moves ahead, the ministry said.
"The Finance Ministry believes that it would be useful to establish the possibility of creating additional safeguards for borrowers, by prohibiting extending repayment terms of this type more than twice, and making payment schedules a mandatory option for obtaining credit," the ministry said, emphasising that at the time of taking out a loan, borrowers should have a clear idea of how and when they will be required to pay it back.
"Consumers often have difficulty repaying a loan in a timely manner if the entire amount is paid back in one installment, therefore, the Finance Ministry encourages limiting the maximum amount for these types of loans. The FM proposal for the amendment of the law provides that the amount of the loan for a consumer loan agreement for up to 30 days, envisaging repayment of a loan in one installment, may not exceed 50% of the national minimum monthly salary," it said.
A study by the University of Latvia on the use of "quick" loans in Latvia shows that, overall, almost 40% of respondents have faced loan repayment problems. Almost 50% of respondents of the study said that the most frequent solution to the problem of a quick repayment is to extend the loan.
"Such a solution creates in essence a medium-term disadvantage for the client compared to the possibility of agreeing on a payment schedule, starting with a partial repayment of the loan," the ministry said.
Latvia has a large and active non-bank lending sector, which has on many occasions proved a source of controversy.