Quick Credits 2016 – Even More Profitable!

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Now 2016 has started and we are all used to writing digital 2016 instead of 2015 in different places, but today I wanted to look more specifically at the fast credit industry and how the new changes and restrictions have affected that industry. In 2015, as most of you know, a bill was passed that imposed various restrictions on fast creditors so that they could no longer abuse Latvian consumers by claiming huge interest rates. And these amendments were set to enter into force on the first of January 2016. But what has really changed, and what do these amendments to the law really mean?

What are the limitations?

What are the limitations?

Basically, our government made 5 major changes, which are then designed to provide a better service to consumers and prevent non-bank lenders from charging excessive interest rates. These limitations are as follows:

  • The cost of the credit should not exceed the principal amount of the loan issued – This means that if you borrow, for example, USD 150, you will be required to repay a total of up to USD 300 and include both the APR, penalty interest and late fees. This point will prevent situations where a person borrows 100 USD, but failing to return it constantly extends and pays penalty interest, so that the total amount of money repaid can reach up to 500 USD of that initial 100 USD.
  • Strict daily credit costs are set at 0.2% to 0.55% – Amendments to the Consumer Protection Act stipulate that the total daily credit costs should not exceed 0.55% for the first 7 days, 0.25% for 8-14 days, 0.2% for 15-30 days and 0.25% starting from 30 days. This means that the total repayment of the loan will not be able to grow too fast and the debtor will have a better chance of paying off his debt.
  • Default interest can be no more than 36% – For any quick loan, non-bank lenders will no longer be able to claim an interest for more than 36% of the total loan principal, which means that if you borrow USD 100, the total default interest will not exceed USD.
  • Credits will only be available during the day – These amendments also stipulate that credits will no longer be available during the night hours from 23:00 to 7:00 and are designed to reduce reckless borrowing by alcohol or other intoxicants.
  • Bill of exchange cannot be used as a means of payment – This paragraph states that a bill of exchange or bill of lading cannot be used as a means of payment that can be accepted as a repayment in the case of a quick credit.

What has changed?

What has changed?

To a large extent, consumer credit has become even more accessible and more likely to be granted because, although creditors will have to reduce their profits, they will certainly not suffer losses and are likely to continue to grow and develop. But it is likely that these changes to consumer law will be enough to stop the bad press being placed on non-bank lenders and now people, although still paying more than bank loans, will no longer be able to sink into over-indebtedness. It must be said, though, that this kind of government intervention is peculiar to the non-bank creditor sector, and, for example, setting a time for borrowing money and not one of the strangest decisions our government has made.

Of course, it seems out of the box to pass a law that will protect alcoholics and gambling addicts, but don’t we all have the same rights and if I really need the money to call a car tow truck or fuel to get to an accident site? Non-bank loans are likely to be issued in exactly the same amount as they were in 2015, and the only thing that will change is that people will be able to borrow more wisely, as the total cash repayment will definitely not exceed these 100%. It is also possible that loans will be issued for longer periods and as of January 1, all non-bank lenders have changed their lending policy and will no longer issue loans for less than 7 or 15 days.

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