Re:Baltica Exposes Predatory Loans

Published: 12 February 2013


OCCRP partner Re:Baltica published an investigation Monday on the non-commercial short-term lending market in Latvia, highlighting the dangers and pitfalls that await low-income customers in the quick-loan market. The investigation raises questions about the source of capital used to start and run the largest quick-loan provider in Latvia.

Those with the lowest lincomes are at the highest risk for exploitation by the short-term lending firms, and are also the most likely to utilize their services, Re:Baltica's investigation found. With compound annual rates as high as 1552%, Latvia's poorest citizens are at risk of being caught in a lending trap, whereby they are forced to extend loans (costing them additional fees), and in worst-case scenarios take out new loans to pay off initial debts.

Re:Baltica's reports on the unclear sources of funding for the largest of Latvia’s quick-credit parent companies, 4Finance. Of the two main shareholders of 4Finance as reported in 2011, one is a Cypriot offshore company, and the other is a Maltese firm which is itself owned by eight additional offshore companies.

Re:Baltica suggested the need for increased regulation of the non-commercial lending sector in Latvia. Limiting times that text-based-lending is available, restricting the maximum allowed compound annual interest rate on loans, and less ambiguous advertising are suggested as ways to curtail predatory lending. These concepts have been successfully applied in other European nations.

The quick-credit companies are banding together to fight off possible regulations that they  fear will impede their ability to function efficiently and limit profits. As public dissent towards unsavory loan tactics grows, the companies are scrambling to maintain their  image.

Read the full Re:Baltica story here.