Kyriakos Mitsotakis: Definitive end to excessive compound interest — What borrowers gain from the new regulatory framework

This concerns user loans of up to €100,000, unsecured, with the draught instrumentality from the Ministry of Development acceptable to spell to nationalist consultation wrong May.

The betterment marks a important displacement successful user credit, aligning Greek instrumentality with EU directives to forestall situations wherever financially distressed borrowers are forced to repay 2 oregon adjacent 3 times the archetypal superior borrowed.

Under the caller framework, borrowers volition person the close to retreat from a indebtedness statement wrong 14 days of signing, arsenic these loans transportation minimal costs owed to the lack of collateral.

The rules use to user loans up to €100,000, including recognition cards — a important inclusion fixed that precocious recognition paper involvement rates often pb to debts much than doubling implicit time.

At a clip erstwhile recognition cards are progressively utilized to header with ostentation and rising surviving costs, the hazard of caller defaults is significant. However, the caller strategy introduces a information net, protecting consumers from excessive charges erstwhile restructuring their debt.

The measure volition beryllium submitted for consultation successful May. According to Ministry sources, banks person already formed a moving radical to lend to its drafting, arsenic these changes are portion of Greece’s work to harmonize with EU law.

More specifically, the authorities volition headdress full repayment for unsecured user loans astatine 30%–50% supra the archetypal capital. For example, a €100,000 indebtedness could not transcend €130,000–€150,000 successful full repayment. The nonstop percent volition beryllium determined aft consultation and whitethorn alteration depending connected the benignant of loan.

What consumers beryllium today

Interest rates stay high:

• Credit cards: 15.5%–18% for purchases, 18%–20% for currency withdrawals (plus further charges)
• Consumer loans: 8%–15%, depending connected borrower profile

These rates often origin indebtedness to escalate rapidly, adjacent for borrowers making regular payments.

As of February:

• Credit paper balances stood astatine €2.26 billion
• Total user indebtedness (including cards) reached €8.53 billion

What happens aft the instrumentality passes

If full indebtedness exceeds the ineligible headdress (30%–50% supra the principal), the excess magnitude volition beryllium automatically written off. This applies to some bank-held loans and those managed by servicers.

The consultation process volition find whether the instrumentality applies lone to caller loans oregon besides to existing debts.

Limited interaction connected banks

The fiscal interaction connected slope equilibrium sheets is expected to beryllium limited, adjacent if the instrumentality includes older debts. Estimates suggest further provisions volition not transcend €200 million.

This is mostly due to the fact that galore heavy compounded loans person already been transferred to servicers, which often use important write-downs — sometimes reducing debts to the level of the archetypal main oregon adjacent lower.

As a result, the load connected banks is expected to stay manageable and not materially impact their fiscal stability.