2018-02-27
In 2017, Lithuania’s consumer credit market posted a significant decline in the number of those who were late to repay their loans, as well as in the number of those who took out the riskiest credits.
‘Last year, the number of new consumer credits extended dropped, but their volumes increased and their repayment period lengthened. The consumer credit market shrank drastically in 2016; as a result, last year, the number of extended credits decreased by another 5 per cent down from a peculiar ‘floor’, said Vytautas Valvonis, Executive Director of the Supervision Service.
Last year, consumer credit lenders (other than credit institutions) and three peer-to-peer lending platforms granted about 470 thousand new consumer credits. This is almost 5 per cent less than in 2016; however, the total amount borrowed increased by 17.7 per cent, to almost EUR 370 million.
At the end of 2017, the number of those who were late to repay their credits for more than 90 consecutive days was twice as small as at the end of 2016: out of nearly 485 thousand consumer credits – slightly more than a tenth. The total amount of resulting arrears (including late payment interest, penalties and other amounts payable under contracts) stood at EUR 38.9 million and was nearly twice as small as at the end of 2016. Most of this contraction is related to the sale of terminated consumer credits to debt recovery companies.
In 2017, linked consumer credits comprised half of the total amount of extended credits. About 207 thousand of them (EUR 183.2 million) were extended, a decrease of 11.3 per cent from 2016. The average amount of one such credit rose by a fifth, to EUR 884; the average annual interest rate was 5.6 per cent, the average annual percentage rate of charge –13.7 per cent, and the medium term was three years.
Credits below EUR 290 remain the most expensive and at the same time the riskiest type of consumer credit. Last year, compared to 2016, they dropped by a fifth though. The average amount of consumer credit (both below and above EUR 290) was EUR 680 (compared to almost EUR 540 the year before), the average annual percentage rate of charge fell from 77 per cent to 60 per cent, while the average interest rate – from 46 per cent to 38 per cent. In most cases the borrowing term was two years.
Last year, compared to the year before last year, lending via peer-to-peer lending platforms more than doubled: the amount of extended consumer credits stood at EUR 17.7 million (in 2016 – EUR 8.4 million). The annual percentage rate of charge for consumer credit dropped from 37 per cent to 29 per cent, the average interest rate – from 21 per cent to 17.5 per cent over the year. The medium term of borrowing lengthened somewhat, to about three years, and the average amount borrowed increased to about EUR 2.5 thousand.
In its supervision of the consumer credit market, in 2017 the Supervision Service of the Bank of Lithuania imposed six penalties and gave three notices to consumer credit providers and operators of a peer-to-peer lending platform; one company was eliminated from the Public List of Consumer Credit Providers. The penalties were imposed for violations related to the calculation of the default on liabilities, reduction of consumer credit amount upon its early repayment, assessment of creditworthiness, etc. There have been fewer cases of essential violations in creditworthiness assessment.