When you look at the first half-year of 2016, the quantity of pay day loans awarded in Lithuania reduced by two thirds 12 months on 12 months, whereas the quantity lent to customers halved. 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 associated with Law on Consumer Credits that came into force at the beginning 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 associated with Board associated with the Bank of Lithuania.

In the 1st half-year of 2016, the entire number of new pay day loans awarded, set alongside the past half-year, paid down by 68.7 % — to 130 thousand; in identical duration, the total amount of payday advances issued decreased by half — to EUR 65 million, its value that is lowest since 2013.

Credit rating lenders examined customer solvency alot more cautiously. Within the first-half 12 months of 2015, roughly 40 % of candidates had been issued a quick payday loan; year on year, the share of authorized applications contracted to 26 percent. Indebtedness of people more youthful than 25 declined by almost one fourth. In mid-2015, young people taken into account more or less 30 percent of total clients of cash advance organizations; now their share will not also account fully for 23 percent.

Recently the amount of loans overdue contracted. 12 months on year, the quantity of credits overdue for 30–90 times paid off by significantly more than a third (or 34.9%), resulting in a first-time-ever contraction that is annual the quantity of overdue loans.

‘Inadequate assessment of consumer solvency was the problem that is main the forex market. Latest checks reveal that organizations have a tendency to record somewhat fewer solvency evaluation violations; nevertheless, and even though current styles are favourable, we’ll continue steadily to monitor the marketplace closely, and, because had been the truth so far, will not tolerate irresponsible financing,’ said V. Vasiliauskas.

Since 2012, whenever it annexed the credit rating market guidance, the financial institution of Lithuania has imposed 45 charges on cash advance businesses for lending towards the unemployed, students along with 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 her latest blog last year. More accountable credit rating loan provider behavior can be underpinned by more stringent sanctions for violations, established into the legislation on credit rating.

The financial institution of Lithuania had currently advised to tighten up what’s needed associated with the Law on Consumer Credit 36 months ago. At that moment, to be able to re re solve the difficulties in this sector as fast as possible, the supervisory authority ready at its very own effort systemic amendments to your legislation and introduced them to your Ministry of Finance. Later on, an operating team had been put up in Seimas to enhance regulations on credit rating. In addition involved representatives associated with Bank of Lithuania together with Ministry of Finance. The main amendments for this Law, proposed because of the financial institution of Lithuania, ended up being introduced this past year whenever Seimas adopted the amendments to your legislation on Consumer Credit made by the aforementioned working group; they came into force in February this current year.

Recently, the typical yearly rate of interest on pay day loans followed a downward trajectory, decreasing from 72 to 42 % throughout the 12 months. What the law states on Consumer Credit possessed an effect that is significant tiny credit prices. Having amounted to very nearly 100 percent year that is last in 2010 the typical yearly rate of interest on tiny customer credits is fluctuating around 65 %, dropping in short supply of the 75 per cent interest ceiling laid down within the legislation. The expense of credit can also be impacted by the strengthening competition between cash advance organizations and peer-to-peer lending platforms.

Nevertheless, the share of funds lent by peer-to-peer financing platforms, when compared with that by pay day loan organizations, continues to be little, and even though pronounced growth is recorded. Over the— that is half-year the start of 2016 to July 1 — the loan profile of those platforms doubled — from EUR 2.3 to 4.6 million. It taken into account almost 2 percent for the whole loan profile 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 utilizing peer-to-peer financing platforms, and very nearly 380 thousand clients of pay day loan organizations.