Lithuanian parliament clamps down on instant credit loans

Sixty-one MPs voted in support of the amendments, two voted against with six abstentions. However, parliament has to vote a second time to pass the amendments.

The changes will tighten consumer credit advertising regulations. Based on the proposal, it would be prohibited to advertise consumer credit during the events for people younger than 18 years of age or in the advertisements of such events. Consumer credit advertisements would be banned in education establishments where people younger than 18 years of age study. Information about the activities of consumer credit lender or consumer credit mediator and services proposed would have to be correct, clear and not misleading.

The so-called night credits would be prohibited striving to protect consumers, especially those who abuse concluding consumer credit agreements. It was proposed to ban paying out consumer credit from 10 p.m. to 7 a.m. Moreover, people younger than 18 years of age would be prohibited from concluding consumer credit agreements.

Before concluding a consumer credit agreement, a lender, following the principle of responsible lending, would have to evaluate the client’s creditworthiness based on the information received from the client and from creditworthiness registers and information systems or by substantiating the information provided by the client with other proof.

The amendments also provide for a “cool-down period” of two days, within which a client could terminate his or her consumer credit agreement without stating the reason and would repay the amount of credit received without any interest, tax or compensation.

The explanatory note of the amendments states that currently the Law on Consumer Credit provides for the annual percentage rate of charge for consumer credit at a maximum of 200 percent. However, this raises doubts whether it meets fair business practice and if such an amount is always fair or is in line with consumer interests.

It was proposed to regulate consumer credit prices by establishing a two-stage system. Consumer credit agreement would establish consumer credit interest of up to 75 percent. While the remaining expenses included in the aggregate consumer credit price, excluding interest, and calculated daily could not exceed 0.04 percent of the total consumer credit amount. Finally, consumer credit cost could not exceed the total amount of consumer credit loan.