In Ukraine, want to ban payday loans

В Украине хотят запретить кредиты до зарплаты

MPs propose to limit the maximum size of interest rates on consumer loans.

MPs wondering how to protect ordinary Ukrainians from the greed of lenders willing to lend them a couple of thousand hryvnia straight from the underground without reference to the salary and off-scale rate, which in some cases can reach several hundred percent per annum. To this end they registered in the Verkhovna Rada on 10 July, the draft law No. 10343 with the eloquent title “On the protection of the rights of borrowers of non-Bank financial institutions”.

The author of the document, the Deputy from “popular front” Oleg Medunitsa once stipulated: the proposed restrictions do not relate to banks, government lending programs, and loans for the sum more than 10 minimum wages (41 730 UAH).

In all other cases, the creditors will have moderate appetites. The document proposes to ban loans of up to 30 days, and also limit interest rates on longer-term loans:

  • For loans up to 90 days – maximum 180% per annum.
  • For loans from 90 days to a year – not more than 100% per annum.
  • For loans from one year, to a maximum of 60% per annum.

The total amount of accrued interest cannot exceed 20% of the loan for loans up to 3 months and 40% for a long period of time.

But it’s not all restrictions. The author also proposes the repayment of the loan: equal payments twice a month for short-term loans and monthly loans for a period of 3 months.

To set a limit on the maximum one-time payment at 40% of the average monthly salary of the borrower for the last six months. And also prohibit the financial institution to credit the customer for more than 6 months.

The document also stipulates the right and procedure of the restructuring of the debt on the loan.

In accordance with the written in the draft rules, all new contracts signed in violation after the law came into force will automatically be void (of the old act will not apply). Moreover, the rule breaker will be required to pay the borrower compensation in the amount of 30% of the loan amount.

However, for these changes to become law, the document must score in the Parliament of at least 226 votes of deputies. Moreover, the current convocation of the Parliament at all desire will not have time to consider the project. So, it will have to be redone in the new Parliament.