Minister Firm on Restrictions on Quick Loans

An advertisement for a "fast loan" by an online loan agency Photo: Postimees/Scanpix
5/21/2014 11:45 AM
Category: Economy

Justice Minister Andres Anvelt has vowed that more stringent restrictions on instant loans are on the way, probably beginning in January. 

Interest groups who met Tuesday at a meeting with the Justice Ministry discussed three-pronged measures: a cap on maximum annual percentage rate, ad restrictions and oversight of consumer credit companies. 

Anvelt said the various proposals are being hashed out in different ministries and that there should a coordinated effort to make them simultaneous. 

"They could enter force at the same time," he told ETV. "This should be talked over with different ministers, and we should make sure the enforcement mechanisms are effective after we put a limit on the APR."

However, business representatives expressed caution over the annual percentage rate limit. Marko Udras of the Estonian Chamber of Commerce and Industry said instant lenders would likely start offering larger loans to maintain their current profitability. 

BestCredit CEO Fred Sooläte, representing one such lender, said larger loans and longer terms would be a favorable development and that he backed changing his business model provided there was a coordinated approach and clear rules. 

Quick loan providers have been criticized for predatory practices that result in a vicious cycle. Over 30 percent of the country's 100,000 people who have borrowed from such companies have developed problems paying off the loans.


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