Data updating to the bank – from necessity to commercial opportunities
Announcements of “cheap” loans filled the advertising market during the past few years. “During only 15 minutes”, “without security”, “only with the identity card” and “without commission” are the offers that make an increasing number of people fall into the traps of microfinance organization. They shortly realize they are full of debts owing to the considerable costs with misleading interest and heavy penalties. Figures show each fourth active persons benefited from the services of non-banking financial institutions. The subject was raised in a TV feature on Radio Free Europe of the series “Simply so”, IPN reports.
Economic researcher of the think tank “Expert-Grup” Dumitru Pântea said many people do not have access to bank loans because they do not meet the harsher lending conditions. The microfinance companies share out money in an uncontrolled way and develop with rapid steps. Among the most often violations committed by microfinance companies are the non-indication of the effective annual interest rate in commercials. Only the monthly payments are indicated and the consumers are thus misled. The advertisements say the interest is “0%”, but the offer is actually for the first three days and the interest can reach 20-30% or even 100%.
Specialists of the Agency for Consumer Protection and Market Surveillance said their capacities to fight this phenomenon are limited owing to the mild legislation that stipulates small fines of about 9,000 lei for misleading adverts. Sergiu Cebotari is one of those who fell into the trap of “cheap” loans. In March 2017, he decided to take out a loan of 23,000 lei repayable in 14 months. He signed the contract in only four minutes. In three months, he wanted to repay the loan in advance and paid almost 26,000 lei, but the sum wasn’t enough. Only then he saw that the debt was much higher, of over 40,000 lei. He was obliged to pay a sum equal to the interest rates for the whole repayment period. Few know that any client can ask for a model contract 15 days before signing it. Specialists say the clients usually see the contract several minutes before signing it.
Sergiu Cebotari felt cheated and went to the Agency for Consumer Protection and then to court. The judges who examined the case ruled that the microfinance contract contained 15 abusive clauses. The microfinance company didn’t agree with the decision of the ordinary court of law and challenged it in the Appeals Court. The judges there rejected the appeal for the reason that the appeal period expired.
The non-banking lending organizations haven’t been extensively supervised until a month ago. The law on microfinance organizations adopted in 2004 contained two pages of general provisions that empowered the National Commission for Financial Markets only to monitor statistics. Regulations started to be imposed on microfinance organizations in only 14 years.
From 73 non-banking lending organizations in 2012, the figure rose to almost 200 in 2018, with these having assets totaling over 6 billion lei. The firms activated in a much more permissive regime and could release loans to almost anyone at uncontrolled interests rates and without checking if the applicant can repay the loan.
Some of the countries obliged the microfinance organizations to indicate the annual effective rate on loans, including in advertisements, while others imposed even stricter rules and banned the non-banking institutions from charging exaggerated costs.
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