In November, a lot of different opinions emerged in Latvia regarding fast credit on the Internet in connection with the new amendments to the Consumer Rights Protection Law adopted on November 12, which set the annual interest rate ceiling at 100%. This step could create considerable problems for the providers of fast payday loans to offer their services as such. Interestingly, the response of the Latvian Association of Non-Banks Lenders (LNKA) is that customers’ views on fast payday loans are, of course, all very positive.
January 13, 2016 A new name for the Association of Non-bank Lenders is “Latvian Association of Alternative Financial Services”.
What is expressed in customer opinions?
In principle, the same old saying is expressed – fast payday loans are useful to a certain section of the public, because some of the Latvian population does not earn enough to make any savings. Also, quick loans are useful in unexpected situations. So there is nothing new about this campaign, except for 35 rather ordinary but still provocative stories.
Common argument among lenders
A common argument among lenders as to why their industry is in need is that everyone would immediately borrow from the real ushers – private, illegal lenders. There is a contradiction here. Quick lenders expect customers to borrow rationally, that is, customers assume that they are borrowing when assessing their ability to repay. 8% of people who do not give credit make up one share, but CRAC studies say one in three extends free credit. Thus, customers do not borrow rationally, especially when given additional motivation to borrow (eg free credit).
However, the LNCA seems to accept it, knowing full well that it is not. Such a discourse was necessary because borrowing from private people, ushers, bandits, is the most rational choice available to anyone. First, you can borrow from people you know; secondly, pledge something in the pawnshop, maybe sell it. And this third choice, to borrow from the fruitful, is the last card that people who no longer lend to fast lenders!
Of course, the LNKA’s arguments are sound and true, but the disproportionate amount of intimidation with the fruitful bubble may just suggest that the LNKA has nothing to say. But the fact is that it has happened, and it no longer makes sense – it seems that LNKA will bring a lawsuit against the Latvian state.