Voting against the recommendation of the Financial and Capital Markets Commission (FKTK) the parliament ruled that the FKTK should assume supervisory and control functions over the quick-loan industry.
If passed in its third reading and promulgated by the President, the amended law would limit daily total loan costs to 0.25% of principal loan amounts. Also a three-month term limit has been set on repayment periods and no loans are to be issued between the hours of 11pm and 7am.
The amendments come in the wake of consumer complaints received by the Economics Ministry about too-high interest rates, poor lender assessments of borrower solvency and excessively punitive fines.
However, prominent celebrity sports figures stepped into the debate Wednesday when BMX bike champion Māris Štrombergs and Latvia’s BMX team head coach Ivo Lakučs released an open public letter to all Saeima political factions in which they expressed concern over the proposed changes to the Consumer Protection Law meant to limit the fast-credit providers.
In their letter Štrombergs and Lakučs claim the amendments would put obstacles in the way of the non-bank lender companies in Latvia, thus derailing their sponsorship activities in support of the BMX athletes and the national team.
The letter was prompted by a notice sent by non-bank lender 4Finance executive director Toms Jurjevs, which stated “If such amendments to the law are passed, we will unfortunately be forced to review our support strategies.”
This, in turn, got the BMX stars upset enough to write the deputies with their gripe. “We’re at the start of the season, everything’s all planned out, the BMX Federation wants there to be order and we’ve banked on certain resources. Now we’re worried as to how to bring all this through to the end, because we know how it goes with finding willing sponsors here,” said Lakučs.
The Consumer Protection Bureau (PTAC) pointed out that there was no linkage between a firm’s decision to sponsor a sport and the proposed amendments to the law.
“In fact, think about at whose expense the merchants can afford to sponsor – at those people’s expense who can’t afford to pay off their credited loans,” explained PTAC director Baiba Vītoliņa.
Meanwhile investigative journalism center Re:Baltica has looked into the quick-loan market and reached the following conclusion, according to its lead reporter Inga Spriņģe.
“Their profits won’t be ridiculously large anymore, just regularly large,” she said.
Spriņģe added that the issue is one of unethical methods – the system asks borrowers to pay back the money all at once, which is why people keep extending the terms of the loan.
“And this is where they make all their profits. By driving people into debt traps – they have to keep borrowing more and more because they can’t pay it all back at once. Ninety percent of all loans taken out last year in Latvia were set on those terms,” she said.
Head Andris Nātriņš of the Research Department at the Banking College also expressed surprise that the sports stars were willing to become “marketing mouthpieces” for the quick-loan companies. In his view, a more acceptable alternative to these types of firms would be credit unions and other similar socially responsible micro-crediting establishments.