Consumer Campaign READ BEFORE YOU SIGN

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Consumer Campaign READ BEFORE YOU SIGN !

• Czech Consumer Association
• Libor Dupal

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• Starting points (1)
• More and more citizens in the country use
  consumer credits, financial loans, mortgages
  etc.
• The financial services products are preferably
  used by such households whose allowance and
  budgets are relatively low

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• Starting points (2)
• Consumer is generally a weaker party in the
  contractual relation
• Consumers do not have necessary theoretical
  knowledge or practical experience for concluding
  contracts
• Consumers are not vigilant and cautious enough
  they do not read attentively the contractual
  conditions.

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Priorities of CCA

• Participate on expert basis as a defender of
  consumer interests and rights
• Develop consumer protection on the basis of
  PREVENTION (incl. approval process of laws,
  development of standards etc.)
• Provide assistance and advise with special
  attention paid to the disabled, the elderlies
  etc.
• Provide education and training (CCA accredited by
  the Ministry of Education).

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Consumer borrowing in the CzR

• What were the trends in Czechia in 2002-2004 ?

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Growth in Czech consumer credit
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Increase of mortgage

• During these 2 years the mortgage increased 2.5
  times
• from 51 bn to 120 bn CzK
• (? 1.7 bn to 4 bn).
• Source CNB and Credit Counselling Service

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Household lending

• During these 2 years the mortgage increased 2.5
  times from 51 bn to 120 bn CzK
• (? 1.7 bn to 4 bn).
• Source CNB and Credit Counselling Service

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Household lending

• Growth in loans to non-financial corporations
  7.5
• Growth in loans to households 34.4
• of which
• Mortgages 52.8
• Building society loans 32.4
• Consumer credit 13.7
• Loans to households 28.0 of bank loans at end
  2004 compared with 22.2 at end 2003
• Source CNB and Credit Counselling Service

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Concerns over indebtedness

• The uncertainties and potential risks include
  fast growth in lending to households, which is
  leading to a gradual increase in their
  indebtedness. Growth in mortgage loans is
  particularly sharp. The interest burden on
  households is also rising.
• Czech National Bank, Annual Report 2004

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Consumer loan credit quality

• In the case of consumer credit, households
  discipline as regards repaying loans on time and
  in full is significantly worse.. Their quality
  has steadily deteriorated, and the share of
  classified consumer loans in total consumer loans
  exceeded 12 in mid-2004.
• Czech National Bank, Financial Stability Report
  2004

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Assessment based on domestic data

• Grounds for concern
• High growth rate relative to wages salaries /
  GDP
• High growth relative to other types of lending
• Consumer inexperience with credit / risk of debt?
• Grounds for reassurance
• Growth from a very low base
• Strongest growth - mortgages
• Main lenders - Intl banks finance companies
  with significant experience from home markets
• Improving infrastructure (e.g. credit registers)
• (Source Credit Counselling Service)

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Objectives of the Campaign

• Open publicly the issue of the risks
• Develop awareness raising outputs to warn
  consumers against imprudence
• Develop information and education campaign

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Forms of Performing Campaign

• A seminar in the Czech Parliament and others in
  various regions
• Booklets and newspapers (conclusion of
  contracts)
• Awareness raising spots on TV and radios
• Advertisements published in newspapers
• Participation in discussions (TV, radios).

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Examples of Performing Campaign
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Examples of Performing Campaign
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Examples of Performing Campaign TV SPOT
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Examples of Performing Campaign

• Booklet detailed information on consumer
  contracts in financial sphere (credit, loans,
  mortgage )
• Special issue of our consumer newspapers
  Konzument-Test.

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NEW CONSUMER CREDIT DIRECTIVE

• LOOKING FOR THE POSITION OF THE CZECH CONSUMER
  ASSOCIATION

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NEW CONSUMER CREDIT DIRECTIVE

• CCA prefer (1)
• Mortgage to be directly covered by the new Act
• APR ideally should be calculated in a uniform
  manner
• incorporating all the cost elements linked to the
  credit contract
• Appropriate pre-contractual information should be
  provided

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NEW CONSUMER CREDIT DIRECTIVE

• CCA prefer (2)
• Maximum rates should not be necessarilly
  included
• Possibility for consumers to withdraw from the
  credit agreement within 14 days
• Possibility for consumers to repay their credit
  earlier (compensation to the creditor?)
• Total harmonization should relate just core
  issues (mutual recognition issue).

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Thank you for your attention !

• Libor Dupal
• Sdruení ceských spotrebitelu
• e-mail dupal_at_regio.cz
• www.regio.cz/spotrebitel