Banks, Financial Services, Legislation, Lithuania, Loan, Markets and Companies

"Although the Responsible Lending Regulations, applied to consumer credits since last year, helped curb negative trends in the consumer credit market, the most up-to-date statistics indicate that it is necessary to implement the complex changes in legislation that have been previously suggested by the Bank of Lithuania," says Vilius Sapoka, Director of the Financial Services and Market Supervision Department of the Supervision Service of the Bank of Lithuania.

According to the data of the Bank of Lithuania, over the second quarter of 2014 consumer credit lenders granted 289.92 thousand credits, the total of which amounted to LTL 313.16 million (EUR 90.7 million). The number of extended credits increase over the quarter by 5.47%, while their amount – by 13.95%. The number and amount of granted small consumer credits remained almost unchanged, but the rapidly increasing volume and amount of credits over LTL 1,000 (EUR 290) is alarming. Over the quarter, nearly 52 thousand consumer credits over LTL 1,000 (EUR 290) were granted, while the paid amount totalled LTL 131.21 million (EUR 38 million): compared to the previous quarter, the number and amount of granted credit increased by more than 28%.

The dangerous trends are also evidenced by the increasing amount of consumer credit borrower debt, when payment is overdue for more than 90 consecutive days. At the end of the second quarter of 2014 it amounted to LTL 308.11 million (EUR 89.2 million) (4.16% more than at the end of the first quarter). Credit borrowers are usually late in repaying consumer credits exceeding LTL 1,000 (EUR 290); 63.72 thousand credits were overdue for more than 90 days, amounting to a total of LTL 196.42 million (EUR 56.9 million). Over the quarter, the number of such credits increased by 7.68%, while their amount – by 8.24%.

The Bank of Lithuania has presented complex proposals to change the Law on Consumer Credit. It proposes to decrease the annual percentage rate of charge for consumer credit, to limit the possibility of concluding a consumer credit agreement without prior consideration, to obligate the consumer credit lenders to inspect all of the information received from customers, to provide for additional requirements for advertising, proportional fines for violating the law.