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Most non-banking lenders will disappear from Latvia’s market next year

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Most non-banking lending companies in Latvia will have been liquidated by the end of next year or beginning of 2020. This means short-term loans will no longer be available to residents, predicts Alternative Financial Services Association of Latvia.

This major change is expected because mid-2019 will mark the coming into force of amendments to the Consumer Rights Protection Law meant to introduce a specific interest rate restriction on non-banking loans, which will be much lower than the expenses associated with the issue and maintenance of a loan, BNN was told by the association.

«During the pre-election period politicians decided to tackle regulations that will negatively affect the accessibility of financial services in Latvia. We see that banks mostly issue loans larger than EUR 500, whereas smaller amounts are usually issued by non-banking lenders. Once changes come to force, short-term loans will no longer be available in Latvia with July onwards,» explains the head of the association Gints Āboltiņš.

The association predicts non-banking lenders will no longer issue short-term loans from July onwards. Companies active in this sector will still support loans issued before amendments came to force for a couple of months.

«New changes will push out smaller companies, reducing competition on the financial services market. I predict the largest market participants, ones with access to ample resources, will compete with commercial banks in the segment of loans with longer repayment terms and larger amounts,» Āboltiņš comments on expected changes.

The association stresses that the approved amendments are anti-constitutional. With that, companies working in the sector plan to submit a plea to the Constitutional Court to assess the legality of those changes.


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