Photo from UNIAN
Demand for easy loans is growing rapidly.
Journalists say Ukrainian citizens in 2019 received microloans exceeding the capital city Kyiv's budget as they are becoming increasingly lured by offers requiring no employment record.
However, by taking fast money, Ukrainians risk losing everything and finding themselves in a debt pit, according to the Hroshi TV show.
Demand for fast money is growing rapidly. While in 2017 Ukrainians got UAH 21 billion (US$742 million) in loans, in 2019 they took UAH 70 billion (US$2.5 billion), which exceeded Kyiv's budget.
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According to debtors, high interest rates, the coronavirus crisis, and job loss have made debt repayment almost impossible. That is why collectors taunt debtors, as well as their relatives and acquaintances, with phone threats.
Lawyer Denys Tsypin believes that the state should set limits on interest rate.
"The state in no way limited the loan interest rate. That is, if I write that I give UAH 100 [US$3.5] at a 1,000% per annum – is this normal?" he said.
Ukrainians taking loans almost never pay attention to such clauses in the contract as an interest rate and penalty for late payment.
According to the lawyer, in legal terms, it's impossible to limit financial institutions in the accrual of interest.
"No one can forbid a microfinance company to lay down 1,000,000% in fines or penalties," the lawyer said, adding that high interest rates are an element of psychological effect.
"They write this for psychological effect. If a person is ready to make payments, they will even pretend to make a certain discount, offering to pay the loan body, interest, and only part of the fine," the lawyer said.
Moreover, one can apply for a microloan online. Thus, fraudsters can apply for a loan on behalf of a person even without the latter's consent or even knowledge.
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According to economist Yaroslav Zhalilo, interest rates on microloans are clearly regulated in developed economies. "Everything is clearly regulated there, namely interests and rights of both parties. In Ukraine, debtors are disenfranchised," he said.
Background
In December 2019, the Verkhovna Rada, Ukraine's parliament, passed at first reading the bill on the introduction of a tool to protect debtors' rights and legitimate interests from unscrupulous collectors.
Bill No. 2133 on protection of rights and legitimate interests of debtors was registered in the Rada on September 12, 2019.
The adopted law came into force on January 20, 2020.
Banks were required to disclose the cost of consumer credit.
Bill No. 1109 to expand the list of credit agreements covered by the law of Ukraine on consumer lending passed its first reading on February 4, 2020.
On August 25, 2020, the National Bank of Ukraine (NBU) announced plans to create a register of collectors and update approaches to regulating this business in Ukraine.
As of August 30, 2020, Ukrainian state-owned banks wrote off UAH 26 billion (US$918.7 million) in non-performing loans.
On September 9, 2020, the NBU elaborated on the protection against collectors.
On September 16, 2020, the Verkhovna Rada passed Bill No. 1109 to limit the total amount of payments collected from a borrower along with penalty and interest in case of default on microloans. The volume of funds collected shall not be more than double the loan body.