Predatory lending practices remain a persistent issue in the Czech credit market, with some companies charging exorbitant interest rates that can trap unwary borrowers in cycles of debt. While reputable lenders typically charge between 10-15% interest on a 50,000 CZK loan over two years, some of the market’s most aggressive players demand rates that can result in borrowers paying several times the original loan amount.
Companies like CFIG Credit, ViaSMS, and FlexiFin currently top the list of most expensive long-term loan providers. In extreme cases, interest rates can reach 1% per day, leading borrowers to pay up to five times the original loan amount over a two-year period. For instance, a loan through FlexiFin could result in an additional cost of 301,000 CZK, while ViaSMS borrowers might pay an extra 216,000 CZK.
The situation has led to a surge in complaints to the Financial Arbitrator, with cases more than doubling from 2,500 last year to 5,600 this year. Encouragingly, about 80-90% of these cases end in reasonable settlements.
Relief may be on the horizon, as European consumer protection legislation could eliminate extremely expensive loans from the Czech market within two years. One proposed solution would cap the annual percentage rate at four times the standard bank interest rate.