International Personal Finance Plc said Dec. 9 that it is reviewing legislative amendments proposed recently by the Polish ministry of justice to strengthen anti-usury legislation in the country.
The ministry proposed, among other things, to reduce the noninterest costs for consumer loans to 10% of the loan value and an additional cap of 10% per year, from the current level of 25% of the loan value and an additional cap of 30% per year, introduced in March. In addition, the combined noninterest costs of a loan could not exceed 75% of the loan value, compared with the current level of 100%.
IPF, which is present in Poland via Provident Polska, said it "is reviewing the proposal to assess the extent to which the profitability of its Polish business would be affected by the proposed changes, should they be implemented, and is also examining appropriate mitigation strategies to minimize any potential impacts." The company added that it intends to actively participate in the 14-day public consultation process launched for the draft legislation.
The proposed legislative amendments provide for comprehensive changes in Poland's civil and penal codes, as well as banking law and consumer credit legislation, with a view to eliminating "the pathology of usurious lending," Bankier.pl reported Dec. 9, citing the proposal. In addition to limiting the maximum noninterest costs of consumer loans, the draft amendments also restrict the value of collateral under such loans and provide for imprisonment for up to five years for those not complying with statutory maximum limits set on loan charges.
Jaroslaw Ryba, the head of Poland's Association of Lending Companies, said stricter penalties for individuals illegally providing consumer loans are needed, but noted that the new cost caps could reduce budget revenues by around 1.5 billion Polish zlotys and result in the closure of all nonbanking loan companies. The new requirements would affect not only nonbanking lenders, but also banks charging high commissions on their cash loans, the report noted.
Shares in London-listed IPF plunged to 160 pence apiece in Dec. 9 trading, having closed the previous day at 285.2 pence.
As of Dec. 9, US$1 was equivalent to 4.23 Polish zlotys.