A planned law against usury would affect not only loan offices, but also banks. If a proposal to categorise any loan with an annual interest rate of more than 20% as usury passes, it could affect even credit cards and some consumer loans. That is why banks would like to change the proposals put forward by the ČSSD and the KDU-ČSL.
“Every fixed maximum rate set by a law poses a risk that it will make loans less accessible to some high risk clients,” said Jan Matousek, deputy executive director of the Czech Banking Association.
Banks admit that aside from credit cards, it is often loans used by people from low-income groups that have interest rates of 20% or higher because these groups pose a higher risk. Most consumer loans start with interest rates at just under 10%. According to Česká spořitelna spokeswoman Kristýna Havligerová, clients who do not pay their fees regularly can sometimes get to loans where the interest exceeds 20% because of penalties for late payments.
“The problem is not usually the just the level of the itnerest rates, but the enormous fees and various fines that then increase the total cost to astronomical levels,” says Matoušek. That is why the Czech Banking Association wants to discuss a different system than that proposed by MPs. The association also wanted the central bank to watch over non-bank providers of loans. The lower house will discuss two proposals to regulate usury. The KDU-ČSL wants the maximum cost of a provided loan not to exceed seven times the collateral loan interest rate set by the Czech National Bank. That rate is now 2.75%, which would mean that the loan could not have a total interest of more than 19.25% annually.
The ČSSD is proposing to be more benevolent in its definition of usury. It would not by determined by the yearly interest but by the so called RPSN, which also includes fees connected to the loan.
