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Parliament passes loan-sharking law

A LAW that aims to protect consumers from loan sharks will come into effect at the start of 2008, the SITA newswire wrote.

The law on legal usury, or loan-sharking, introduces a compulsory form that must be included in loan contracts, which would show clients how the loan's interest rates and other conditions stack up against the average conditions on the market.

"Citizens must be able to properly evaluate the loans they take out from companies that do not have banking licenses," Justice Minister Štefan Harabin said. "This is because an offer that seems advantageous might end up in a family tragedy.

"The Justice Ministry advises people to borrow money from institutions supervised by the National Bank of Slovakia (NBS). If citizens become victims, all possible legal ways of protection must be used. We have to fight against legal usury."

The Slovak parliament approved the law on October 25. It aims to increase the transparency of the voluntary auction sale process and prevent citizens from losing their property because of harmful loan conditions. President Ivan Gašparovič has already signed the bill into law.

Legal usury is usually linked to deceptive advertisements that promise a good deal on a loan when someone uses their house or apartment as collateral. But the contract binds the client to repay several times more than the actual value of the loan.

The debtor is then pushed to sell his property under a voluntary auction sale under harmful conditions.

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