Czech loan sharks increase activity as Christmas approaches
With Christmas fast approaching, many Czech consumers are tempted to take out loans. Legislation on loan conditions in the Czech Republic is still vague and unlicensed lending companies take advantage of these holes in the constitution, preying on ill-informed consumers. Often, penalties for not paying installments on time are 700 percent of the original installment. David Šmejkal, director of the debt advice center Poradna při finanční tísni helps customers who have fallen prey to the companies who offer these loans.
“These firms concentrate on a certain kind of customer who is not very educated very well financially, and have problems calculating the annual percentage rate of what the loan will cost them and for them, it is difficult to determine if the loan is appropriate for them or not.”
“These contracts have to be in agreement with the Civil Code and the Business Code, and the companies or the physical person can choose what kind of agreement they will offer their customer. But the ultimate problem is within the contract: Often, high annual percentage rates and problematic conditions in case of late payment of installments.”
How can such contracts even be legal?
“These conditions, which are very inconvenient for the customer, are most often offered by non-banking, non-licensed, very small companies that often start up and end within a year. So in terms of legislation, it is difficult to prohibit such action. The Ministry of Finance is preparing a new consumer act and this new act will be contain a new directive on consumer credit.“
Do these loans appear more often during Christmas time?
“I think that yes, this is the time that is quite dangerous for consumers.”