Let me make it clear about alterations in pay day loan market — more responsible financing, fewer indebted

the amount of pay day loans given in Lithuania decreased by two thirds on year, whereas the amount lent to customers halved year. Credit lenders assessed customer solvency more responsibly. When it comes to very first time in history, credits overdue reduced in number.

‘Changes are obvious. Active guidance, stricter needs regarding the Law on Consumer Credits that arrived into force at the start of the and competition forced credit lenders to fundamentally change their approach and assess customer solvency more cautiously year. Each one of these modifications relieve the overdue loan payment burden, that also mitigates the possibility of serious social repercussions,’ said Vitas Vasiliauskas, Chairman regarding the Board of this Bank of Lithuania.

In the 1st half-year of 2016, the entire level of new pay day loans provided, when compared to past half-year, paid off by 68.7 percent — to 130 thousand; in identical duration, the quantity of pay day loans awarded reduced by half — to EUR 65 million, its value that is lowest since 2013.

Credit rating lenders evaluated customer solvency a lot more cautiously. The share of approved applications contracted to 26 per cent in the first-half year of 2015, approximately 40 per cent of applicants were granted a payday loan; year on year. Indebtedness of individuals more youthful than 25 declined by almost one fourth. In mid-2015, young people accounted for roughly 30 percent of total clients of cash advance organizations; now their share will not also account fully for 23 percent.

Recently the quantity of loans overdue contracted. 12 months on 12 months, the total amount of credits overdue for 30–90 times paid off by a lot more than a 3rd (or 34.9%), resulting in a first-time-ever yearly contraction in the amount of overdue loans.

‘Inadequate evaluation of consumer solvency ended up being the problem that is main forex trading. Latest checks reveal that businesses have a tendency to record considerably less solvency evaluation violations; nevertheless, despite the fact that current styles are favourable, we shall continue steadily to monitor industry closely, and, because was the truth so far, will not tolerate irresponsible financing,’ stated V. Vasiliauskas.

Since 2012, whenever it overran the credit market guidance, the lender of Lithuania has imposed 45 charges on pay day loan organizations for lending into the unemployed, students as well as other violations; the quantity of fines surpassed EUR 270 thousand. The operations of UAB 4finance, the largestpayday loan company, were suspended due to multiple gross violations in assessing customer solvency at the end of last year. More consumer that is responsible loan provider behavior can be underpinned by more stringent sanctions for violations, established within the Law on credit rating.

The lender of Lithuania had currently advised to tighten certain requirements associated with the statutory Law on Consumer Credit 3 years ago. In those days, so that you can re solve the issues in this sector as soon as possible, the supervisory authority ready at unique effort systemic amendments to your legislation and provided them towards the Ministry of Finance. Later on, a functional team ended up being put up in Seimas to enhance what the law states on credit rating. In addition it involved representatives associated with the Bank of Lithuania additionally the Ministry of Finance. Area of the amendments for this legislation, proposed because of the financial institution of Lithuania, had been introduced this past year whenever Seimas adopted the amendments into the legislation on Consumer Credit made by the aforementioned working group; they arrived into force in February in 2010.

Recently, the typical yearly rate of interest on pay day loans followed a downward trajectory, decreasing from 72 to 42 percent throughout the 12 months. Regulations on Consumer Credit had an effect that is significant tiny credit prices. Having amounted to nearly 100 percent this past year, in 2010 the typical yearly rate of interest on tiny customer credits happens to be fluctuating around 65 %, dropping in short supply big picture loans loans of the 75 per cent interest roof laid straight straight straight down within the legislation. The expense of credit rating can be impacted by the competition that is strengthening pay day loan organizations and peer-to-peer financing platforms.

Nevertheless, the share of funds lent by peer-to-peer financing platforms, compared to that by pay day loan businesses, continues to be little, and even though pronounced development is recorded. Over the— that is half-year the start of 2016 to July 1 — the loan profile among these platforms doubled — from EUR 2.3 to 4.6 million. It taken into account almost 2 percent of this loan that is entire of cash advance businesses and peer-to-peer financing platforms, which amounts to approximately EUR 225 million. In mid-2016 there have been nearly 4 thousand clients making use of lending that is peer-to-peer, and very nearly 380 thousand customers of cash advance organizations.