For those unable to control urge to borrow — free protection
As of 1 November the Bank of Lithuania will provide a new service ‘STOP: Consumer Credits’, which can help protect from excessive and irresponsible borrowing. People will be able to freely include their name in a special list of individuals to whom consumer credits will not be granted. If a consumer credit provider will nevertheless grant credit to such a person, the agreement will be considered invalid, while the credit granting company will be fined.
‘We are introducing a tool that can help avoid trouble related to loans. The service “STOP: Consumer Credits” will allow limiting the uncontrollable desire to take out consumer credit; consumer credit companies will no longer be able to lend to such individuals. We used to regularly receive phone calls from people asking for help in controlling the excessive borrowing of their family members. With the entry into force of the amendments to the Law on Consumer Credit, this will become possible and, as hoped, will contribute to reducing the devastating effects of irresponsible lending’, – says Rasa Cicėnienė, Chief Legal Adviser of the Financial Services and Market Policy Division at the Bank of Lithuania.
According to her, the proposed service should help to protect against impulsive, hasty decisions that could have long-term consequences.
The list will be administrated and managed by the Bank of Lithuania, and its data will be given only to consumer credit providers, once a request regarding a particular individual is submitted. As of 1 November, any person will be able to include themselves in the list.
This can be done conveniently, in several ways: through the e-banking system, by logging in to it through the E-government Gateway or through the Bank of Lithuania website; requests to be included in the list can also be submitted by to the Bank of Lithuania directly, as well by sending them by registered mail or email.
People may include themselves in the list on their own account, or they can be written in by representatives with proper authorisation. If family members (spouse, parents, adult children) do not have such authorisation, but still feel that there is an uncontrollable borrowing problem, they can go to court and ask for their family member to be banned from concluding consumer credit agreements; the Bank of Lithuania, once the court ruling is decided, will include the indicated person in the list of non-creditable persons.
In submitting a request, it will always be possible to specify for how long consumer credits are not to be granted. If the time period is not specified, then the person will be removed from the list two years after the day of being included in the list.
As of 1 November, all consumer credit companies gain the obligation to check the list before granting any consumer credit. If the person requesting a consumer credit is included in the list, consumer credit cannot be granted to them. If the company will not comply with this obligation and still grant credit, the concluded agreement will be considered invalid and the company will be fined.
According to R. Cicėnienė, the service ‘STOP: Consumer Credits’ is not just for those who have problems with uncontrollable borrowing. People can also include themselves in the list for security reasons, such as in the case of losing their personal documents, so that other persons could not take out consumer credits in their name.
Persons in the list will only be unable to receive consumer credit; other loans (e.g. housing loans) will be issued according to the general procedure.
Since 2012, when it had taken over supervision of the consumer credit market, the Bank of Lithuania has penalised consumer credit providers 47 times for lending to unemployed persons and other violations of the Law on Consumer Credit, and the total amount of fines exceeded EUR 280 thousand.
Over the first half of 2016, 687.8 thousand consumer credits were taken out in Lithuania, with their total amounting to EUR 401.8 million. Of the total number of consumer credits granted, 201.9 thousand were credits overdue more than 60 days (more than 90 days — 193.3 thousand).