“I owed my phone operator CZK 742.50, and I was entered into the debtors’ register. Now I have problems obtaining a credit loan,” says Radomír Čabla, a bank accountant from Prague. More and more Czechs are experiencing similar problems. Whether it’s the financial crisis or the loss of a job that got them into a difficult financial situation, or whether it’s that they simply don’t want to pay.
According to the association Solus, which keeps a record of “debtors” of credit companies, most big banks or phone operators, the number of cases where clients are paying their debts late increased by nearly a third to 1.2 million. This is the work of 750,000 debtors. At the end of last year, they owed CZK 14.7 billion to banks, operators and credit companies. This is about a third more than the previous year.
A debtor is placed into the register if he fails to pay a bill within three months, and he remains on the list for three years. If he applies for a loan, the bank will see that he has “a record” and sets stricter conditions, for instance, setting a higher interest rate or loaning a smaller amount.
The credit companies confirm that the number of debtors is increasing. “In the second half of 2008, we saw the numbers rise,” said Marek Štejnar, director of the financial department of the company Cofidis. “The number of applicants for credit who are rejected is growing too,” he added.
Home Credit spokeswoman Eva Řimnáčová says that her company hasn’t experienced any great increase in the number of debtors so far, but she expects the numbers will start rising soon. “We admit that the massive lay offs announced by companies these days could make the situation even worse,” she said.
Thanks to the global economic crisis, Czech companies are experiencing a sharp decline in the number of commissions. Many are laying off employees, who then find themselves in unexpected situations and suddenly don’t have enough money to pay off their debts.
Consulting services for people in such situations and law firms are suddenly experiencing increasing numbers of clients.
“Just in the last quarter, the number of people seeking our services has grown by a third. The number of people who need to get rid of their debts and need help preparing the necessary documents is also increasing,” David Šmejkal from the Debt Advisory Center – Counselling in Stringency told HN.
According to Marek Vojáček from the law firm Havel & Holásek, his company had 10,000 cases last year of unpaid debts for consumer credit loans. The year before it was just 4,000. And the number of debtors might continue growing.
“For now we’re not seeing too much of an increase in the number of commissions. But we are expecting an increase. It seems that the number of cases will grow rather than the total amount,” said Petr Benedikt, marketing director for the company Intrum Justitia.
Although the credit companies are experiencing an increase in the number of debtors, banks don’t seem worried. According to Tomáš Pavlík, spokesman for UnicreditBank, the bank has only experienced an about 10% increase in the number of debtors. This data comes from the register of bank debtors.
“The volume of unpaid debts was up until the third quarter of last year at the level of single percentage points, and compared to 2007 it increased only slightly,” said Zuzana Pečená, executive director of Czech Banking Credit Bureau, which operates the banking register in the Czech Republic. Those banking services that are seeing the greatest amount of debtors are those geared toward consumers, such as single-purpose consumer loans, general personal loans and credit cards.
In November 2008 Czechs owed CZK 1.8 trillion to banks. Of that, most were mortgage loans and consumer loans. But the numbers are growing slower. According to ČNB statistics the year on year growth of the volume of debt slowed down from 27% to 18% in November. “Households are expecting tougher times,” said Drahomíra Dubská from the Czech Statistical Office.
