Abstract
Abstract. Express credit institutions have started their activities only five years ago when the economic crisis came and increased the borrowing demand. Now, we have the consumer credit law and other legislative acts which aim to ensure this sector regulation. However, there still remain problems that have to be solved. The main of them are inconsistencies in consumers’ solvency evaluation in different companies, the lack of financial knowledge in society and its information, the aggressive lending and advertising policy. The increasing demand for this service shows its importance and proves the necessity to maintain it in the market while at the same time ensuring consumer protection.Key words: express credits, pay-day loans, consumer credit
Highlights
During the last decade, there have been important changes in the small consumer credit sector, which were especially striking during the financial crisis of 2008
Resolution 03–62 on the consumer credit receivers’ solvency evaluation and responsible lending regulations approval strictly restrained express credit suppliers’ abilities to give consumer loans without an appropriate evaluation of client solvency. This resolution was approved on 1 July 2013, so soon we’ll be able to assess whether such a change of regulation helps to reduce the risk for consumers or forces express credit institutions to leave the Lithuanian market and to destroy the supply of such service
Giving not enough attention to a client’s solvency evaluation, companies later face clients not repaying their financial liabilities, which is usually solved in a trial. Information about such cases creates mistrust in express credit institutions and encourages supervision authorities to search for the possible solutions which can be dangerous to the market existence
Summary
There have been important changes in the small consumer credit sector, which were especially striking during the financial crisis of 2008. Starting with the year 2008, we can see a rapid growth of express credit institutions offering loans without a deep evaluation of the financial state of consumers. The other EU members had similar problems, what encouraged the appearance of 2008/48/EB EU Directive of consumer credit agreements, which was implemented in Lithuania by 2010 December 23 Consumer Credit Law No XI-1253. While applying this law in practice, we can see gaps and a need for an additional legal regulation; this article analyzes the problems of express credit institutions’ regulation and their possible solutions
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