At the moment, due to numerous reservations about the legislative procedure, the draft amendments related to the anti-usury act have been suspended by the European Commission. Experts emphasize that the changes may lead to the complete liquidation of loan companies, which may be a direct cause of the growth of the so-called gray area.
Representatives argue that they have not yet said the last word and will continue to work on reducing the activities of loan companies. Either way, any changes they propose must be notified to the European Commission, which leads to longer legislative work.
Anti-usury Act – What awaits loan companies?
The effects of introducing new regulations can be very severe for the loan sector. Due to the lower profitability of business operations, some companies may go bankrupt or terminate their activities, thus non-bank loan offers will disappear from the market completely. In this way, almost 3 million consumers will be cut off from external financing.
As competition on the consumer finance market decreases, prices in the banking sector will increase dramatically. It is speculated that around 40,000 will lose their jobs. persons employed in the loan sector. Moreover, the state budget income will drop by USD 2.2 billion a year.
The new law also includes high fines for usury. It provides for a prison sentence of 3 months to 5 years for anyone who requests the payment of additional costs or interest twice as high as the statutory maximum.
Loan companies will also lose the possibility of bailiffs enforcement of their housing if the debt does not exceed 5%. its values.
Loan costs and the new anti-usury act
In the proposed amendment to the Anti-usury Act proposed on June 18, 2019, the provisions in the Consumer Credit Act, which specifies the maximum amount of non-interest loan costs, have been modified.
Originally, it was to be limited from 25% to 20% of the loan amount and from 30% to 25% of that amount on an annual basis. Soon after, this value was further reduced to increase the protection of borrowers against unethical practices of loan companies.
According to the latest findings, the amount of maximum non-interest loan costs cannot exceed the sum of 10% of the loan value and 10% of this amount on an annual basis.
Pawnshops and the Anti-usury Act
It is suspected that the amendments to the Anti-usury Act will benefit primarily the so-called gray zone, i.e. entities that provide financial assistance unlawfully. Pawnshops are a great example of this, as they in many cases grant loans without respecting the law, yet they are not the subject of the anti-usury act.
Pawnshops should operate in the form of companies with a share capital of at least USD 200,000. USD and obtain an entry in the Register of Loan Institutions of the Polish Financial Supervision Authority. Statistics, however, show that out of over 15,000 Only pawnshops operating in Poland meet the requirements described above.
This conflict can expose financial problems to many consumers who will not receive funding from a non-bank institution, so they will look for solutions to their problems in Good Finance loans.
Arguments for and against the new anti-usury act
The new draft anti-usury act has become the main topic not only in the loan industry but also among financial experts or politicians. They indicated arguments both for and against the adoption of the amendment to the Anti-usury Act. Here are a few of them:
Depending on the point of view, the opinions of those interested in the topic may differ. However, it is difficult to disagree with the arguments presented above, both those for adopting the anti-usury act and for rejecting it. Time will tell whether the introduction of the amendment to the anti-usury act will be good for the financial market.