Consumer Campaign READ BEFORE YOU SIGN !

March 2006, L. Dupal 1

Consumer Campaign

READ BEFORE YOU SIGN !

Czech Consumer Association Libor Dupal


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;


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.


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).


Consumer borrowing in the CzR

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


Growth in Czech consumer credit

0

10

20

30

40

50

60

70

80

2002 2003 2004

€1.64 bn €2.27 bn€1.88 bn

17.6% 13.6%

Source: CNB and Credit Counselling Service (Note: Excludes non-bank household lending)


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


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).



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



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


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


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 - Int’l banks & finance companies with

significant experience from home markets• Improving infrastructure (e.g. credit registers)

(Source: Credit Counselling Service)


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


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).


Examples of Performing Campaign


Examples of Performing Campaign TV SPOT



• Booklet – detailed information on consumer contracts in financial sphere (credit, loans, mortgage …);

• Special issue of our consumer newspapers Konzument-Test.


NEW CONSUMER CREDIT DIRECTIVE

• LOOKING FOR THE POSITION OF THE CZECH CONSUMER ASSOCIATION


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;


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).


Thank you for your attention !Libor Dupal

Sdružení českých spotřebitelů

e-mail: [email protected]

www.regio.cz/spotrebitel

Consumer Campaign READ BEFORE YOU SIGN !

Documents

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