The maximum interest rates of consumer loans are reduced for the second 6-month period, reaching 95%

2024-07-12 08:32:00, Ekonomi CNA

The maximum interest rates of consumer loans are reduced for the second 6-month

Illustrative photo

Ceiling interest rates for consumer loans have been reduced again for the second half of this year.

According to data from the Bank of Albania, the effective maximum interest rate (maximum NEI) for consumer loans in Lek, for amounts up to 200 thousand Lek, has decreased to 95.19%, from 100% that was in the first six months.

The maximum effective interest rate includes the nominal interest rate, commissions applied by the lender and all loan costs that are passed on to the customer.

Always for amounts up to ALL 200 thousand, the maximum NEI for overdrafts (advances) has increased slightly to 18.71%, from 18.6% in the first six months.

For credit cards, the maximum NEI has decreased to 26.27%, from 27.4% for the first six months.

The maximum NEI for loans from ALL 200,000 to ALL 600,000 has also suffered a significant decrease to 37.43%, from 40.6% in the first six months.

For overdrafts in the 200-600 thousand ALL range, the maximum NEI has increased to 18.77%, from 17.55% in the previous six months.

Even for loans with a value of 600,001 to 2,000,000 ALL, the maximum NEI has decreased significantly to 12.41%, from 15.6% in the first half of the year.

The application of a ceiling interest rate for consumer loans in Albania started at the beginning of 2022. According to the Bank of Albania, the main reason was to protect the consumer from potentially abusive interest rates, applied mainly by some non-bank financial institutions.

Since the first application, the maximum NEI has suffered a sharp decline. The first maximum NEI for small loans up to ALL 200,000, which was set at the beginning of 2022, was at the level of 171.41%, while according to the latest publication of the Bank of Albania, this indicator has already dropped to 95.19%.

According to the regulation "On consumer and mortgage loans", the maximum NEI is calculated by the Bank of Albania on a six-monthly basis, based on the data of the Credit Register administered by it. Maximum NEI levels are published at the beginning of each 6-month period and are based on loans disbursed in the previous six-month period.

This indicator is constructed as the average of the effective interest rate for each product and interval, increased by one third. The maximum NEI is mandatory to be respected by all banks and financial institutions licensed for lending activity in Albania.

The next reduction in the maximum interest rates for consumer loans comes at a time when microfinance regulation is entering a new tightening cycle, following the debates caused by the opening of the court case against several microfinance institutions and private bailiffs, accused of violations legal in the process of collecting bad loans.

The Bank of Albania is already working on regulatory changes, which are expected to bring significant restrictions on lending to microfinance institutions, especially those that provide quick loans.

Sources from the central bank say that they are working with the World Bank consultancy to draft a regulation that aims to limit lending and the client base in consumer microfinance.

Some of the principles on which the new regulation will be supported will be an increased financial analysis of borrowers, the establishment of a credit scoring (scoring of borrowers) and limitation of the number of loans for a single borrower. The objective is for the new draft regulation to be ready at the beginning of autumn./ Monitor