After considering Economy Ministry proposals to introduce new regulations aimed at preventing desperate members of the public taking out loans thay cannot afford, the Saeima committee on economic, agrarian, environmental and regional policies asked the Economy Ministry to tinker with the detail of the legislative amendments but agreed to return the matter to parliament for debate as public interest rises in whether loan providers have too much political influence.
Baiba Fromane, the head of the self-regulating Latvian Association of Non-bank Lenders, said that existing consumer protection rights were sufficient.
Representatives of the Latvian Chamber of Commerce and Industry and the Latvian Confederation of Employers spoke against regulation.
On the other side, Economy Ministry representatives said the amendments were designed to prevent borrowers getting into an endless debt spiral.
So-called "instant" or "payday" loans have grown rapidly in popularity in recent years, largely as a result of the unwillingness of the major banks to extend credit to low-earners. Many come with high rates of interest that make them hard to repay but huge advertising campaigns and carefully-worded terms and conditions mean they are a last resort for many low-income families.
The Economics Ministry has proposed limiting the annual interest rate on instant loans to a maximum of 100 percent, while capping late payment interest rates at 0.05% per day.
The amendments would also ban the advertising and issuing of instant loans between 11 p.m. and 7 a.m in a bid to stop borrowers taking out loans while intoxicated.
Similar amendments were recently passed by the Estonian parliament.