Non-banking institutions will have to adjust to tougher regulations governing their business practices following an amendment to the Civil Code that was drafted by Smer MPs and approved by parliament on April 1.
The legislation is aimed at protecting consumers against the usurious practices of some of the non-banking institutions. The proposal stipulates that it will be necessary to define usury and other illicit practices. If such practices are found with respect to a signed contract it can be cancelled. The amendment is also set to protect people from losing money due to sequenced or rollover loans.
The amendment also aims to introduce a standard-size font for consumer-loans contracts, while also setting a limit on interest rates on cashless loans at a maximum of twice the average interest rate used by banks.
Moreover, the legislation should prevent distraintments of real estate in the case of financial claims of up to €2,000. “We want to prevent distrainers from selling somebody's house or flat for a debt of some €1,000,” the TASR newswire was told by Smer MP Anton Martvoň who was involved in drafting the amendment. According to the approved document, bailiffs won’t be able to carry out a distraint order by selling real estate at which the debtor has his or her permanent or temporary residence. They will be allowed to do so only if the debtor faces a number of unpaid debts that exceed €2,000.
The changes concerning distraint orders will come in effect as of June.
Non-banking institutions reacted negatively to this news, with their association claiming that the bill will harm consumers instead of protecting them.
“This amendment may have the very opposite effect than intended by MPs ... as ordinary people will turn to companies in the grey and black zones of the economy instead, where no laws are observed,” Ivan Kahanec, executive secretary of the Association of Consumer Loan Providers (APSU), told TASR.
On the other hand, Maroš Ovčiarik of the website Finančná Hitparáda believes that the market involving non-banking products does indeed need tougher regulation. “Of course, the regulation needs to be carried out in a sensitive manner, so that it doesn’t restrict the accessibility of loans for people who were denied loans by banks, but the risk that they fail to pay the loan isn’t so high,” he said.
Compiled by Zuzana Vilikovská from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.
2. Apr 2014 at 10:00