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Borrowers late to repay consumer credit decline by a fourth over year

April 24, 2017

In 2016, residents were granted half as much consumer credit as in 2015; the number of payments overdue dropped by 26.5 per cent over the year.

‘This pronounced market change was due to tightened regulation of the consumer credit market, further active supervisory actions of the Bank of Lithuania, and a more responsible attitude of creditors. The measures applied were efficient – which is reflected in a sharp decline in persons with payments overdue over the last year,’ said Vytautas Valvonis, Director of the Supervision Service of the Bank of Lithuania.

According to him, with a substantial breakthrough, more modest market changes are projected this year.

In 2016, consumer credit providers (other than credit institutions), together with peer-to-peer lending platforms, granted 491 thousand new consumer credits, a decrease of 55.6 per cent from 2015, when the number of consumer credits was over 1.1 million. The amount of consumer credit granted over the respective period dropped by almost 30 per cent – to EUR 313 million. The largest decrease – of 77.2 per cent – was recorded in small-value consumer credit (less than EUR 290); a sharp contraction in the consumer credit market was due to a decrease in the provision of credit larger than EUR 290 (they decreased by almost 60 per cent from 2015).

In 2016, in terms of the number of consumer credits less and larger than EUR 290, banks accounted for 19.2 per cent, other consumer credit providers – 79.3 per cent, peer-to-peer lending platforms – 1.6 per cent of the consumer credit market.

2016 saw a decrease in the number of persons late to repay debts; at the end of 2016, there were 43 thousand, or 26.5 per cent, less contracts with payments overdue for more than two consecutive months than at the end of 2015. The total amount of debts (including late payment interest, penalties and other amounts payable) dropped by nearly 12 per cent over the year, to EUR 74.2 million as of 31 December 2016.

The Bank of Lithuania, which supervises the consumer credit market, paid particular attention to the assessment of the creditworthiness of borrowers so as to prevent lending to unemployed persons, schoolchildren and other consumers, whose consumer repayment possibilities, given their existing financial liabilities and income received, are to be viewed as doubtful. In 2016, the Bank of Lithuania carried out 32 investigations into how creditors assess creditworthiness, imposed 25 fines, the sum of which amounted to EUR 153 thousand, and issued two warnings.

Let us also remind you that all those willing to secure themselves against incautious borrowing, may use the possibility to be entered on the Bank of Lithuania-administered list, of persons who are not allowed to be granted consumer credit. At the end of 2016, 296 residents used this service, the oldest of whom was aged 89, the youngest – 18. Currently, the list already includes 400 people.

A detailed review of the consumer credit market 2016 is available on the Bank of Lithuania website.