Czechs warned about the pitfalls of shopping on credit
What's the price tag on a Merry Christmas? Very high indeed, if you look at the Czech Republic. The shopping frenzy is in full swing - and once again Czechs are spending more than they can afford.
Every year Czechs spend more money on Christmas presents and every year their expectations rise higher, in a consumer frenzy that some fear is spiralling out of control. Banks are falling over themselves offering credit and many shops are advertising products on hire purchase. A public survey suggests that a third of all presents this year will be bought on credit - at a very high interest rate.
Economists are ringing alarm bells: the indebtedness of Czech households is growing steeply- the number of loans has doubled in the last two years - and there is a real danger that many families will not be able to repay the money. Moreover, it is quite obvious that many of them are getting ripped off. According to the Czech Inspection Office many of the ads advertising quick loans are intentionally misleading. Consumers are lured by a relatively low interest rate but not told about the annual percentage credit rate and other costs linked to the loan. This can send the overall cost of the loan sky high.
"On the European level, there is a new proposal for a revision of the consumer credit directives. These new directives, which will subsequently be implemented in Czech legislation, will introduce further restrictive criteria which should in future afford consumers better protection."
So, at the present time it would help if Czechs were simply less gullible...
"Yes, consumers should certainly be more responsible in taking out loans. They should take the time to check out the situation on the market and compare all the offers and to read carefully the contracts that they receive. The contracts must contain all the relevant information, including the percentage credit rate and I must say that I find it very strange that even if that rate is staggering - consumers still accept it."