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Kristaps Bergmanis

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Kristaps Bergmanis
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SIA ExpressCredit informs on aproved changes in legislation

On October 4, 2018, the Parliament of the Republic of Latvia adopted amendments to the Consumer Rights Protection Law, which, among other things, stipulates limiting the total credit costs for the consumer by 0.07% per day. The law also stipulates additional conditions related to the solvency assessment of creditors, as well as restrictions related to advertising of lending services. The terms of the agreement regarding advertising and interest rate restrictions will come into force on 1 July 2019. Amendments to the law do not significantly affect the Lombard services provided by SIA ExpressCredit.

SIA ExpressCredit forecasts that in correlation to price decrease the demand for consumer loans will increase significantly in the sector. Under the adopted regulation, issuance of credits of small amounts and for short periods will no longer be profitable. For example, currently borrowing € 50, after 30 days, € 52.5m have to be repaid and many customers use this option, especially in the regions and seniors. With the amendment to the law, the range of services offered by companies will change, and small amounts and short terms will disappear.

SIA ExpressCredit Chairman of the Board Agris Evertovskis comments on the changes: "Following the introduction of the previous price caps in 2016, the corporate loan portfolio grew very significantly, and the number of extensions increased markedly. With these amendments, the borders between banks and non-banks have been torn down, consumer credit prices will be comparable among sectors. The potential of the segment is enormous. In the medium term, we are planning a small drop in sales, that will be partly offset by savings in marketing costs, as well as reviewing the company's cost structure according to the situation."

Stricter regulation is expected to reduce the risks that prevent non-bank companies from raising financing at lower rates in comparison to current rates of 12-15% per annum.

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