In recent years, we have been observing the dynamic development of the non-banking market. Products once considered to be solutions for financially weaker customers, today they shine in showrooms on a par with banks. What has changed during this period and why are customers increasingly willing to choose loan companies’ offers? Let’s do a short analysis.
Anyone who tracks the development of the non-banking market will probably agree that it has lacked important regulations, e.g. those protecting the interests of borrowers. The prices of identical loans in two competing companies differed by up to several dozen USD, the lenders added inadequate fees for additional services, and customers who were late with the loan repayment received very expensive prompts.
Of course, we could list many more examples of this kind. The lack of a harmonized lending policy gave a lot of room for abuse. A client who did not compare offers and reached for the first loan from the bank, so he could easily fall into huge financial problems. Therefore, the non-bank market needed changes. These changes, in turn, were to initiate an amendment to the so-called anti-usury act.
Loans after March 11, 2016
The new assumptions of the Anti-usury Act came into force in March 2016. From that moment we could observe a profound transformation of payday loans offers, especially those provided via the Internet. First of all, the lenders standardized all non-interest costs of their loans to the value of 25% of the borrowed amount and 30% of this sum per year. This limit meant that the majority of offers disappeared from the service of repayment and the prompts ceased to be paid. As a result, the dangerous problem of rolling the debt several times has decreased, and the lenders have stopped making money by sending reminders to pay.
In addition, the Act has clearly defined the issues of fees for late repayment of liabilities – from 11 March 2016 they cannot be higher than the maximum interest for delay specified by the Civil Code.
The new regulations have also caused significant changes in the legal aspects of non-bank companies. The amount of equity at the level of $ 200,000, or running a company in the form of a joint-stock company or a zoo, as well as other requirements led to a strong reshuffle on the non-banking market. Some companies have completely ceased operations, some brands have been absorbed by much larger players, and other loan institutions have started to act as intermediaries. The Association of Loan Companies estimated that after the introduced changes, more than 20 loan entities disappeared from the market.
2017 – a year of further changes
2017 also brought changes on the loan market. From July this year, every institution wishing to grant loans must obtain an entry in the Register of Loan Companies launched by the Polish Financial Supervision Authority. This does not mean that the PFSA will cover lending companies with the same supervision as, for example, banks, but thanks to such an obligation consumers will gain access to the list of legally operating non-bank entities. Thus, the security of using quick loans may increase.
The past year also saw changes in the advertising of the products mentioned. Currently, all data on the cost of the obligation must be presented “in at least as visible, legible and audible” as other information intended to encourage the customer to choose the product offered. However, if there are no numbers in the advertising materials, the lender must ensure that the APRC of the offer is clearly presented based on a representative example. A popular little print is therefore a thing of the past. However, the client should easily see the most important information from his point of view, which of course is to increase awareness of the costs of the potential contract.
Time for client loans
Due to the introduced changes, the non-bank market is becoming a more and more friendly place for the customer, which translates into interest in this type of product. The Credit Information Bureau reports that in 2017, 1.5 million consumers used non-bank loans online, and the liabilities they incurred did not usually exceed $ 4,000.
Non-bank loans are certainly in favor of their availability for young people who have not yet managed to make up their credit history. Such clients are often unreliable to the bank. On the other hand, loan institutions easily find the financial support they need.
What’s more, this type of solution is suitable for consumers who want to get cash quickly with minimum formalities. Non-bank institutions provide just such an opportunity. In the case of internet offers, there are also advantages such as the possibility of submitting an application at any time, quick confirmation of identity through special applications or the option of choosing the form of payment of the loan.
On the other hand, industry experts agree that the non-banking market is entering a period of some stabilization. The increase in the client’s portfolio in the near future is estimated at several percent, and this is mainly due to the increase in the value of the loan and the extension of the period of using the borrowed cash. The current economic situation of borrowers obviously has a big impact on this state of affairs. Low unemployment or funds from the 500+ program increasing creditworthiness mean that society can afford more and is able to pay back higher liabilities. Installment loans are starting to play an increasingly important role, but there are some changes in payday loans. Brands granting short-term loans are gradually increasing the available limits and extending the repayment period.
2018 – what awaits us in the coming months?
Therefore, due to the forecast stabilization of the market, we can also expect that non-bank companies will devote more attention to nurturing relationships with regular customers. Until now, it was the person who was lending in the given institution for the first time that could count on the best offer. Now lenders will want to bet on the quality of the portfolio of clients they have already acquired. Of course, this does not mean that the fight for new customers will be completely suspended. In the near future it will simply take on a different character.