Although the amendment to the Consumer Credit Act, which was in force as of 1 December 2016, has often been criticized, it now appears to bear fruit. It can be said that falling into significant debt problems is considerably more difficult than in the past. This applies mainly to clients with poorer financial literacy, who were generally the most risky group.
Providers assess the ability to repay the loan for the applicant
Earlier practice was that the ability of a particular applicant to meet its obligations was not much verified. This has changed since 1 December 2016, so providers are obliged to assess whether it will be realistic for the person to honor their commitment. If it is assessed that they are not, they will no longer receive any credit. This applies primarily to situations where clients already have several loans and yet go to other providers to ask for more.
Even with repeated loans
It has also been common practice (especially for short-term loans) that recurring loans were offered virtually unchecked. It did not matter whether the applicant was in debt several times in between. He was approved once, he met his obligations and so he was granted a repeated loan without checking the creditworthiness. This is also the change brought by the amendment. Even for repeated loans of one applicant from the same provider it is necessary to carry out a creditworthiness check and the ability to repay.
All positive information appears
When people got into a debt trap, they very often sought out various forms of free help. Who was close to them?
- Civic associations
- Free debt counseling
- Workers of shelters and other services
These are the places where information comes regularly from the fact that the number of clients in need has been decreasing since the end of last year. Of course, it is still early for uniform conclusions, but as we can see, the first year of operation has shown that it is possible to reduce overall indebtedness and, above all, people falling into unsolvable debt traps.
Nor do they ‘indebt’ debt relief experts’
Many people took loans with the prospect of personal bankruptcy in the worst case. Nor was it often the way out of trouble. There were a number of dubious debt relief agencies on the market. The result, however, was astronomical service bills that even more indebted the client. And that is over. Although some still try to detour, the conditions are set clearly.
Since July, it is true that people cannot file debt relief themselves, but only use the services of accredited persons, such as lawyers or bailiffs. And since they must have clear permits to do this, they are supervised. This leads to the fact that they cannot charge their clients excessive amounts. This is a positive message both in view of the fact that people do not fall into debt traps so often, but also that they can find a way out of it much easier than in the past.