In the area of consumer credit, you can meet a myriad of different products, and a regular person is often lost in the offer. The new legislation has the ambition to clear the market, especially from dishonest providers and brokers and their opaque products or unfair practices. Since this March, many businesses have been unable to offer loans because they did not meet the demanding licensing criteria. In this page are tips to watch out for when you want to borrow a payday loan.
Tip # 1: The amount of the installment will tell you nothing
Many promotional offers indicate the amount of credit and the monthly installment. However, the amount of the installment is not a decisive indicator. The lower the installment, the longer the repayment and the more charged fees and interest. You will not learn from it about the cost of the loan, ie how much you actually get paid. It is important to know the so-called annual percentage rate of charge ( APRC ). This indicates how much your loan will be annually taking into account the interest rate and other fees. However, its value may be misleading for various action offers, for example, when the client receives a part of the interest back for proper repayment. It is also good to look at how much you pay in total, ie simply compare the amount of the loan and the amount of the total amount you pay.
Tip # 2: The law has limited sanctions, but beware of fines for reminders
The new Consumer Credit Act, which applies to loans granted after March 1 of this year, significantly reduces early repayment fees. The Provider is therefore entitled to the so-called expeditiously incurred costs objectively incurred in connection with the early reimbursement. “Serious companies, including our absurd early repayment fees, have not booked before,” says Robin Stránský, marketing manager of Roach, a purely Czech company with a 13-year tradition and providing medium-term loans to its clients. The law also regulates contractual penalties for delayed repayments. Thus, the maximum contractual penalty can be up to 0.1 percent a day from the amount with which the consumer is in default. “However, limitation of contractual fines can be avoided by charging high sums for reminders, and their number is not limited,” warns Robin Stránský, the rogue provider.
Tip # 3: A 14-day cooling-off period is not entirely new
An apparent novelty stemming from the Consumer Credit Act, which aims to protect consumers, is a two-week cooling-off period. Once a bidder receives a specific offer, he/she has the right to think about it for fourteen days, and the loan provider may not change the offered credit parameters within this timeframe. “Basically, it’s not a novelty. Previously, consumers had the opportunity to withdraw from the contract within 14 days of signing without penalty. Perhaps some companies forgot to tell clients. But our clients always knew about this option, ” says Robin Stránský.
Tip # 4: No bank loans you no longer have to worry about
The quality of services on the non-bank loan market was often poor. Last year, for example, the Czech Trade Inspectorate (CTI) imposed 47 fines in the amount of 5.5 million crowns to mediators and providers of consumer credit. The laws were violated in more than half the controls. These were mostly unfair practices, often giving untrue information. The new consumer credit law is fighting this scandal. It sets relatively stringent criteria for lending, which now only meets 107 providers of consumer loans who have applied for a license from the CNB. The number of lending companies has been considerably reduced and their activities can be better controlled not by the CTI, but by the Roach (CNB). With strict regulation of non-bank entities, licensed credit companies’ products become an acceptable alternative to bank loans.
Tip # 5: Avoid Illegal Providers
Of course, people should be alert to whether they have come across an illegal business that has not applied for a license and can no longer provide or mediate lending. Non-bank loans until recently offered around 60,000 entities. As only a small number of companies have been able to meet the demanding criteria, the license risks that some entities will continue to operate illegally and out of the CNB’s oversight. “As the new Consumer Credit Law significantly increases the demand for creditors to look after their ability to repay, people who can not get a loan can easily become victims of usurpers who will move outside the regulated market,” concluded Robin Stránský, the authorization to provide loans can be verified on the CNB website.