When a negative answer is received due to excessive financial obligations or debt, the resident tries to borrow elsewhere. And sometimes it works, according to specialists from General Financing and Best Finance. They believe that the new amendments to the Consumer Credit Law are not aimed at limiting such cases and that they will not solve the problem of over-indebtedness.
Among the recent changes in the law
Only one point has the clearest link with responsible lending. It is an obligation to assess a person’s creditworthiness by verifying the accuracy of the information provided by the person. If the problem has been labeled as debt, then the measures must be targeted. First and foremost, it is one-size-fits-all enforcement of the law. Second, operational enforcement of the law. The infrastructure needed for responsible lending is there, ”says Andrius, CEO of Best Finance, a credit bureau.
According to General Financing and Best Finance, 79% In cases where applications for funding were rejected by General Financing, residents turned to other financial institutions for funding there. 52% received credit from them. According to the study, 24% of the contractors later became debtors and 76% paid on time.
General Financing does not provide more than 50% of consumer credit
The main reason is too low a person’s income or too much financial liability already existing. According to Konstantin, CEO of General Financing, he should not receive credit from other financial institutions without a consumer credit in the company he manages, in a responsible market.
“Statistics show that a negative response from a company conducting a responsible customer solvency assessment does not stop people from willing to lend and more self-assessing their financial capabilities. These people are no longer eligible for consumer credit, but some still get it because they turn to irresponsible companies.
The consumer credit market can be cured by three simple rules
The 40% rule and enforcement. This rule requires that the financial obligations of residents should not exceed 40 percent. from their monthly income.
Prohibition of granting loans to persons who are already in arrears. Currently, such a provision is not explicitly enshrined in law.
Mandatory verification of financial obligations at the credit bureau and reporting. Currently, any consumer credit institution that operates responsibly can verify that a person is not over-financially liable. Irresponsible companies not only do not check such information before granting consumer credit but also do not provide information about their credits to responsible companies, thus limiting the ability to correctly assess the customer’s obligations.
“Compliance with all three rules is already in place and the necessary measures are in place. We have a SODRA database to implement rule one, and the credit bureau compiles a credit history to help you comply with the other rules, says Konstantin Balakin. “Offenders can be disciplined now, waiting and delay will only exacerbate the problem.”