Those who have taken a quick loan are now with internet and telephone lines cut off due to inability to pay those bills, says Asya X. a housewife from Ruse who is against the use of so-called fast loans . She adds that some of her friends have used their services and were surprised by the conditions imposed by creditors. As a result, many of them have problems with repayment.
The opinion of Asya is shared by many user at Internet forums. The image of the lending companies quickly became dishonoured in the recent years due to the many public complaints of customers who had to pay a lot more on their credits than originally expected. Needless to say, most of the companies do not allow an early repayment of the loans, and as a consequence the costs become too expensive.
For example this is the case with the Feratum international company which is one of the first on Bulgarian market. With Feratum a loan cannot be repaid earlier than agreed, but a delay carries serious financial penalties. According to the general conditions published on the site for a 45-day loan, a customer will have pay 48% interest. The client could extend his return period twice for a fortnight each time, which will cost an additional 20 percentage points to the interest to be paid. If delayed another 10 days he would also haver to pay a penalty of BGN70. The simple account shows that for a BGN399 loan the customer will pay BGN820 in three months. Moreover, in the general terms it is written that the borrower shall pay all other costs of the borrowing. This includes costs such as SMS-s. Much of the users experience difficulties in paying their loans because of such surprises, a poll carried out by the BANKER showed. In this respect the information of the Central bank is quite clear: at the end of 2011 problematic claims of companies for quick loans amounted to BGN355.3 million, or nearly 18% of total loans (BGN1.970 billion). On an annual basis uncollected liabilities increased by 17.4% to BGN52.7 million.
The standard explanation for this is often the crisis, but behind the figures one cans always see another reason – lack of awareness among customers. This showed a study carried out by the Commission on Consumer Protection, under which nearly 77% of respondents are not aware of their right to receive complete information before signing the loan contract. It is exactly these users that are potential victims of contract terms written in small print.
A quick check of the BANKER among the companies offering fast loans via the Internet, showed that for most customers it will be impossible to know exactly how much money they will have to give back if they decide to use the services of non-bank financial companies. Most often the information is limited to an online credit calculator that does not include other mandatory conditions on any loan that burden its repayment – delays, early repayment, surcharges, etc. This information can be obtained only when the client is approved for a loan online and gets a contract. Therefore a reporter of BANKER applied for promotional credit of BGN100, which was announced on the page of the company as an interest-free. Under the terms published on the Internet, and repayment by the 15th day absolutely no fees are due (for amounts below BGN400, note the use the word fees and not interest). When calling the office of the company, its representative politely explained that that this is indeed the fact. It turned out however, that upon receipt of the amount a fee of BGN10 had to be paid and it was understood only when they ring you up ytp tell you that you have been approved for the credit.
These cheap tricks may well have to be abandoned with changes that are being prepared by a working group formed between the Ministry of Finance and the Association of Banks in Bulgaria. As already mentioned, it has come to a consensus on the regulation of consumer credits of up to BGN399. This decision now seems the only safe one and was announced by Deputy Minister of Finance Mrs. Pencheva. It is a well-known fact that these loans are often the most problematic ones, as they were previously excluded from the Consumer Credit Act and it allowed some companies lenders to not fully inform their consumers. By putting them in regulation, however, micro-credit companies will be required to work according to the European standards of transparency and convenience.
Consensus on the regulation of fast crediting is there not only among the members of the working group, but also among other concerned parties. Consumer Credit Act does not allow us to respond in case of contracts for amounts less than BNGN400, as they are not governed by it. Otherwise, there are serious discrepancies found there between the loans and the final amount due. We have had complaints in which the difference between the taken and returned amount is 700 percent. That is usury!, the Chairman of the Consumer Protection Commission, Veselin Zlatev, told the BANKER.
