Online loans are expected to become much cheaper due to the planned introduction of legal changes. The amendment to the Anti-usury Act will also have several other significant effects. So how will all this affect borrowers? Will they gain and how much?
How much will the maximum loan cost decrease?
The anti-usury act entered into force in 2006. Its provisions are of key importance for the functioning of the entire loan sector. The Anti-usury Act is amended every few years. At the end of June 2019, the Ministry of Finance issued another draft amendment to this Act.
The proposals in the project are strict for loan companies. First of all, stricter limits are to be imposed on non-interest loan costs on an annual basis. The new limits are to be as follows:
- 10% for costs independent of the loan period (the loan period means the loan period).
- 10% for costs depending on the loan period.
In total, non-interest costs will be able to reach a maximum of 20%. The change is very large because the current limits for non-interest costs that are dependent and independent of the loan period are 55%.
Therefore, the amendment to the act is to reduce the limit by as much as 35%. It should also be remembered that the law also sets a maximum limit on interest costs. This aspect, however, is not to change in the amended provisions.
The sum of the summary means that the maximum APRC, and thus the total cost of the loan will be much lower .
What else will change?
The tightening of non-interest cost limits on loans is the most important change that the amendment to the anti-usury act envisages. However, there will also be several other effects related to loan collateral and bailiff enforcement options.
First of all, the possibility of transferring ownership of real estate to secure financial obligations will be severely limited. Secondly, bailiff enforcement will be prohibited if the debt does not exceed 5% of the property value.
The new version of the act also provides for severe fines for loan companies that fail to comply with the rules. In such cases, the lender may even go to prison.
What does this mean for customers?
The announced changes in regulations can be considered as highly beneficial for borrowers. First of all, online loans will become much cheaper because non-interest costs will be significantly reduced. Cheaper payday loans or online installment loans is a message that will surely please many people.
Borrowers can also feel safer . The tightening of provisions related to loan collaterals or bailiff enforcement may be great news for some borrowers.
As always, however, it should be remembered that borrowing should be done responsibly regardless of the law. So before you make any financial commitment, it’s worth comparing all the options and choosing the best one. An innovative online loan calculator and comparison tool helps. Before entering into a loan, you must always read its terms and conditions and read the contract.
How will the changes affect the online loan industry?
Customers of loan companies should be very happy with the proposed changes, at least as soon as they are finally implemented. However, the changes may significantly change the shape of the entire non-bank lending industry.
Loan companies will suffer the most from the amendment to the Anti-usury Act. For them, lower non-stake costs are tantamount to lower revenues. This may mean that a large proportion of loan companies will cease operations because their operations will cease to be profitable.
There will probably be much fewer loan offers on the market for a small amount, e.g. several hundred zlotys. Limiting non-interest costs may make offering them completely unprofitable.
Over time, lenders’ problems can also prove to be a bit of a problem for borrowers. If some loan companies and offers disappear from the market, then, naturally, customers will have less choice.
When will the changes take effect?
A draft amendment to the Anti-usury Act has already been prepared. However, it is currently difficult to say when it will be finally adopted and when it will come into force. This will probably happen over the next few months.
Perhaps also the shape of the changes will be slightly changed. Polish loan companies believe that the proposals are too restrictive. The matter is also being looked at by the European Commission, which may have reservations about the procedure of legislative act. The Polish Association of Loan Institutions also made its official statement, which also believes that the amendment to the Act is too strict.
Are the changes beneficial?
All the amendments to the Anti-usury Act seek to reduce costs, counteract pathologies and increase the security of people taking loans. Therefore, the direction of legal changes is certainly favorable for borrowers .
Without major controversy, it can be said that preventing bailiffs with relatively low debt is a good idea. Limiting the cost of non-interest payday loans and installment loans online is also the right direction.
However, one may wonder whether the proposed changes in the non-interest cost limit are not too sharp. This could potentially limit the number of loan companies on the market, which paradoxically may also affect borrowers.