The Latvian parliament on Thursday adopted amendments to the Consumer Rights Protection Law giving consumers the right to indicate through credit information bureaus that they do not wish to take out loans. Lenders will be required to take this into account when assessing credit applications.
The amendments are intended to promote responsible lending, provide more effective protection against excessive debt and fraud, and make the lending environment clearer, more transparent and better suited to modern needs.
The changes also introduce new rules for cases in which loan repayments are overdue. Lenders will be allowed to impose only justified and proportionate charges and, before initiating debt collection, will be required to seek less burdensome solutions and provide information about available debt counselling services.
The amendments prohibit the granting of unsolicited credit – a credit product that a consumer has neither requested nor agreed to receive. Lenders will also be required to inform consumers promptly when they exceed their credit limit, including details of any associated fees and interest. If such overdrafts occur regularly, lenders will have to provide information about more favourable alternatives and opportunities to obtain debt counselling.
In certain cases, lenders offering instalment loans and “buy now, pay later” products will also be required to assess the consumer’s ability to repay the loan.
The amendments also introduce clearer rules for digital lending. Before concluding a contract remotely, lenders will have to provide information in an easily understandable format, offer a simple way to withdraw from the agreement and present information in a manner that is easy to understand online. If a credit offer is personalised using automated data processing or artificial intelligence, consumers will have to be informed.
Consumers will also have the right to request human involvement in automated decisions concerning credit applications and to receive a clear explanation of why their application was approved or rejected.
In addition, registration requirements for credit intermediaries will be expanded, while registration requirements will also be introduced for large companies that provide credit in the form of deferred payments.
The amendments also introduce a new product – an equity-release loan. This will allow a person to obtain a loan secured against real estate that is not their primary residence, such as a second unused apartment. The loan may amount to no more than 70% of the property’s market value. Such loans will be available to people aged 21 and over, with a maximum repayment period of 30 years.
On Thursday, the Saeima also adopted related amendments to the Credit Information Bureaus Law.
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