The vast majority of non-bank lenders will disappear from the market next year. The central bank will regulate stricter lending business rules. The amendment to the Consumer Act for 2016 will also stop the high fees for early repayment of mortgages.
The Ministry of Finance is preparing a new Consumer Act, which should be in force as of January 1, 2016. It will cause a big fuss in the non-bank credit market. While today more than 50,000 different lending companies lend money, only one in five non-bank lenders should “survive” next year, as stricter businessconditions are introduced.
Ending unfair loans under central bank supervision
For the time being, the Czech Trade Inspection (CTI) oversees non-bank credit firms, which is also overwhelmed by the control of non-financial traders and sellers of all kinds of goods and services. Since the new year, the Czech National Bank (CNB) will look to lenders. Today, it only regulates banks and credit unions.
Non-bank lending companies will have to go through a network of new qualification requirements (eg proficiency testing, clean criminal record, liability insurance or minimum capital).
The directive prohibits sanctions for early repayment
The revolutionary innovation will also hit the mortgage market. Indeed, according to the EU Directive, Member States can ban banks from charging high fees for early mortgage payments. The new law is also likely to change, but its exact wording is not yet clear.
The penalty will probably not be abolished altogether, but the customer will only be required to pay the costs actually incurred by the bank due to the early repayment of the mortgage. Thus, the fee will not disappear, but it could drop significantly. Today, banks can “reward” faster repayment with a 10 to 100,000 penalty.