The Consumer Credit Act last year was supposed to eradicate the practices of unfair lenders. But they quickly found a way to get around it. Instead of consumer credit, they offer business credit, which entails certain risks for clients.
Unreliable lenders provide credit to people in need who hurry to raise money under certain conditions. Clients force themselves to establish a trade license and create a business plan, although they do not plan to do business. These companies rely primarily on the lack of awareness of their clients, who instead of consumer credit offer business loans.
The supply of these loans continues to increase
Last year alone, The Financial Arbiter handled several hundred such cases. These are primarily non-banking institutions that do not have a license whose scope does not, therefore, apply to them. However, unfair behavior can also be found in companies that have a license.
The problem is that clients who take out a business loan are not protected by the Consumer Credit Act. This means that, for example, in the event of a delay in repayment, penalties may climb to unbelievable amounts, as there is no limit to the amount of the penalties for delay. Also, it is often not possible to repay a business loan prematurely.
Other ways to earn on clients
The Consumer Credit Act, by allowing loans only to companies licensed by Good Finance, significantly reduced the number of credit companies. Most current companies meet the conditions set by law. Nevertheless, it is worthwhile to be vigilant when negotiating a non-bank loan.
Providing business loans to people who do not or do not intend to start is not the only way that some companies try to avoid regulation. Many of them, for example, suspiciously change their headquarters and company name in an effort to do business on the edge of the law and make money on unsuspecting clients.
People in need are most at risk
The most vulnerable clients are people in financial distress who need to get money as quickly as possible. Companies rely primarily on their ignorance, and it is much easier to convince a person in need of a loan.
Moreover, after signing the contract, the client often finds that even with interest, he plays up to twice the amount borrowed. This often leads to a so-called debt spiral, which causes other serious problems.