Ukraine, Wednesday, November 22, 2023 at 1:53 pm
The Verkhovna Rada adopted the law on additional regulation of the consumer credit market in Ukraine. The microloan rate should not exceed 1% per day.
According to him, Draft Law no 9422 Supported by 255 delegates.
New regulations
Act introduces
- The indicator “daily interest rate for consumer loans” should not exceed 1% per day of the total amount of the loan; The rate includes all the borrower’s costs of the loan;
- Daily interest rate (except for consumer loans, discharge of obligations secured by pledge/mortgage or right of trust property) Requirements for mandatory mention in consumer credit agreement;
- prohibiting the creditor and the new borrower from making any payments not specified in the consumer credit agreement and/or not taken into account in the calculation of the daily interest rate specified in the consumer credit agreement;
- empowers the NBU to establish additional requirements for assessing the borrower’s creditworthiness, as well as establishing additional requirements for elements of daily interest rate calculation;
- Obliges the lender to submit all consumer loans, regardless of loan amount, to at least one credit history bureau to evaluate the consumer’s creditworthiness;
- prohibits the establishment in the consumer credit contract of a condition for unilateral extension of the term of credit use (the extension of the term of credit use must be carried out exclusively by concluding an additional contract by agreement of the parties);
The microcredit problem
Previously, the National Bank of Ukraine, financial institutions engaged in microcrediting deliberately choose a business model to provide their services to vulnerable groups of people who are not aware of the consequences of their actions.
Rates for microloans from financial institutions average 1,500% per annum, according to the NBU. The NBU proposed to limit rates by 0.8% per day. Today, this value for microloans is an average of 2.5%.
As a reminder, the Law on the Creation and Circulation of Consumer Lending and Credit Histories came into full effect on January 1, 2021 and changed the microcredit rules.