Luminor Bank has decided not to challenge in court the amendments to the law adopted to support housing loan borrowers, but the other three large banks have not yet decided what they want to do about this situation, as LETA was told by banks.
Luminor Bank representatives told LETA that the bank has decided not to challenge the issue in court.
Swedbank representatives told LETA the bank has yet to make the final decision, because it is clear turning to the Constitutional Court would be an unprecedented case, but it would not resolve matters important for Latvia’s economy.
“On the other hand, it is important to pay attention to the fact that unpredictable and populist activity around the tax policy affects the interest of existing and potential investors about Latvia as a possible location to establish long-term business operations,” Swedbank representatives said.
SEB Bank representatives told LETA that the bank has yet to make any decision in regards to legal solutions for amendments.
Citadele Bank’s board chairperson Rūta Ežerskiene told LETA in an interview that the bank has yet to make a decision.
“The decision to adopt and implement a new tax was made within a couple of months without appropriate discussions with the sides involved and without prior warning. I believe this was not good practice. This creates additional instability and uncertainty for financial markets and the economy in general,” said Ežerskiene.
Citadele Bank has already paid out the first portion of compensation. Judging by the recent survey among customers who have received this compensation, less than half of them will use it for its primary purpose. More than half of them will use it for everyday and other needs.
“The questions is whether this compensation was adopted in the best possible way,” added Ežerskiene.
On the 6th of December 2023, the Saeima passed in the final reading amendments developed by the Budget and Finance Committee to the Consumer Rights Protection Law, which state that support for loan borrowers in 2024 to reach 30% of interest payments, but not more than two percentage points of the interest rate fixed for the period.
To provide this support, credit institutions will be obliged to pay a levy “with a view to protecting the well-being of society, taking into account the payment burden on households”.
The interest compensation on the loan will be received by mortgage borrowers whose loan agreement will be concluded by the 31st of October 2023 and whose mortgage loan balance does not exceed EUR 250 000.
The fee is processed by the State Revenue Service (VID). Credit institutions are to provide appropriate information to VID.
The fee is to be paid by credit institutions and capital companies registered in Latvia, as well as branches of credit institutions and capital companies of other countries which have received the relevant type of licence for the provision of consumer credit service.
Credit institutions will have to pay the fee for each calendar quarter in the amount of 0.5% of the total amount of mortgage loan balances issued by the payer of the fee as of the 31st of October, 2023. The mortgage protection fee will not be calculated or paid for mortgage loans issued at a fixed interest rate throughout the mortgage loan repayment period.
VID will have to pay compensation once a quarter and no later than by the 30th of the month of the following quarter.
Interest compensation on loans will not be subject to deductions, other payments or debt collection.
The mortgage borrower protection fee and loan interest compensation will be applied only for 2024.