Legal changes in non-bank loans – what will change?

In December 2016, the Ministry of Justice announced the preliminary assumptions of changes regarding the so-called anti-usury regulations.

A significant reduction in the limit of acceptable borrowing costs

cash

These changes assumed, among others, a significant reduction in the limit of acceptable borrowing costs. The proposals of the said ministry were radical enough that they met with resistance from other members of the government.

About two years after the fiasco on reducing the cost of “moments”, the Ministry of Justice again announced its intention to regulate the loan market. We decided to check whether the proposed regulations could severely hit the Polish loan industry.

Of course, it is worth remembering that for the time being, we are talking about initial solutions that have not yet been approved by the government.

The new limit on the cost of “moments” is to be slightly lower

money

Overly restrictive cost limits for consumer loans were the reason that the previous plans for additional regulation of the loan market have fallen into the back. It is worth recalling that at the end of 2016, the Ministry of Justice wanted the maximum non-interest cost of consumer credit to be:

  • 10% of the amount borrowed (commission)
  • 10% of the amount borrowed per year (other costs)
  • 75% of the amount borrowed throughout the repayment period

60 loan companies in one place. 

These rates were much lower than those still in force today. Under current regulations, the commission for granting a loan may not exceed 25% of its value, and other non-interest costs should not exceed the 30% threshold per annum (see Article 36a of the Act on consumer credit).

All non-interest costs (throughout the loan period) cannot currently be greater than the loan amount.

money

The cost restrictions proposed by the Ministry of Justice at the end of 2016 were so radical that even banks and credit unions started looking at them with concern.

This time, the institutions mentioned above have no similar cause for concern, because the new regulatory proposal is much milder. This does not mean, however, that the non-bank lender will be satisfied with the plans of the Ministry of Justice.

As part of their initial proposals, representatives of the Ministry of Justice have announced that all non-interest costs of consumer loans (including non-bank loans) will not be able to exceed:

  • 20% of the amount borrowed (commission)
  • 25% of the amount borrowed per year (other costs)
  • 75% of the amount borrowed throughout the repayment period

Burn loan installments by up to 30%. 

cash

If such regulations come into force, the non-interest cost limit for the annual loan will drop from 55% of its value to 45%. In the case of a two-year loan, the same change will be greater.

We are talking about a decrease in the maximum non-interest costs from 85% to 70% of the amount borrowed. According to the proposal of the Ministry of Justice, the non-interest cost limit for a three-year loan is to drop from 100% of its value to 75%.

As for loans for a short period (e.g. 1 month), the main change will be associated with a decrease in the cost limit independent of the time of the loan. Such costs will drop by one-fifth (from 25% to 20% of the amount borrowed).

According to planned regulations, the maximum non-interest cost of a loan for 1 month will fall from 27.5% to 22.1% of its value. As in the case of “moments” for one, two and three years, the companies offering the most expensive loans may be afraid of change.

Leave a Reply

Your email address will not be published. Required fields are marked *