Czech Govt Agency for Social Inclusion says amendments to consumer loan law will help combat exclusion
The recently-approved amendments to the law on consmer loans will transfer supervision of the market in non-bank loans to the Czech National Bank, will limit sanctions for non-payment, and will place greater emphasis on creditors’ responsibilities when providing loans. One of the main anticipated benefits of the changes to aid with limiting the indebtedness of the socially vulnerable should be a significant reduction in the number of usurious companies providing credit.
Together with this amendment, the law thar regulates arbitration clauses will also be changed – these have long been a crucial link in the chain with respect to the trafficking in debt in the Czech Republic. It will now no longer be possible to use such a clause, not only for credit agreements, but for any other consumer contract.
The amendment to the law on consumer loans is a significant step toward greater protection for consumers’ rights, according to Radek Jiránek, director of the Czech Government Agency for Social Inclusion, especially for people who up until now have very easily fallen into the so-called debt trap because of disproportionate sanctions levied against them for failure to pay. The cost of those sanctions frequently exceeds the original principal of the loan many times over and make the debt unpayable.
“The vast majority of non-bank companies will not be able to meet these strict conditions for getting licenses, which means the market will no longer be attractive for them due to its high regulation, and they will gradually leave it,” Jiránek said. In his view it is currently also necessary to aid the large number of indebted persons who have already become victims of the trafficking in debt.
One way to do that would be by lowering the limits for permitting persons to declare bankruptcy. The Agency is also pointing out that there is a need to deal as quickly as possible with the question of so-called accounts that are protected from collections.
Due to a loophole in the law, the debtors’ incomes are currently subjected to collections at two different points in the proceedings. This is the Agency’s experience from the localities where it is currently working or has previously worked.
As many as 115 000 people live in socially excluded localities in the Czech Republic. The Agency is also a member of the Alliance against Debt.
That Alliance has long warned against the sprawling business in trafficking with debt and poverty in the Czech Republic. This business especially thrives in the environment of socially excluded localities.
The Agency included the findings from its field experience in the area of indebtedness in the revised Czech Government Strategy to Combat Social Exclusion for 2016-202. The Action Plan on that Strategy will be submitted to the Government in the fall.
