Licensing may force 80 pct of payday loan providers in Estonia to close in March

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The requirement for providers of express loans to register with the Financial Supervision Authority may force 80 percent of the companies providing such loans in Estonia now to close in March, considering the length of the proceeding.

At this point applications for registration have been filed by about 20 of the 100 or so non-bank credit providers, Livia Vosman, spokesperson for the the Financial Supervision Authority, told BNS. She said proceeding of the application may take up to eight months, which means that the companies which have not filed an application yet may have to close their doors on March 21 in the absence of a license.

The Riigikogu passed a law this spring which makes registration with the Financial Supervision Authority mandatory for all non-bank credit providers and credit negotiators. In addition it imposes a duty of care on credit providers and credit negotiators to take care of the interests of consumers in offering of credit and advising the potential customer – with an obligation to conduct a more in-depth assessment of the consumer's ability to repay the loan.

While there are approximately 100 credit providers in Estonia to whom the licensing requirement applies, about 30 businesses allegedly account for 90 percent of the market volume and six businesses for 50 percent of the market volume.