The real interest, the interest on the principal, the management fees and charges, all the cost elements that have driven buyers of TV sets or refrigerators insane are history now. The merchants that sell in instalments have to display in plain sight or use in the lending contracts the "effective annual interest" (EAI) term, a uniform measure to calculate all costs involved in a consumer credit.
In the absence of enforcement guidelines, the Law 289/2004 on consumer credits for individuals, the first step to rally the Romanian legislation to the Western European one, could catch merchants off-guard, and its enforcement could cause confusion among customers, at least at first.
Dan Pascariu, the vice-president of the Romanian Association of Banks says the National Authority for Consumer Protection, the originator of the law, and the National Bank were supposed to issue enforcement guidelines.
"No such guidelines were released, yet the commercial banks will abide by the law, particularly since most have foreign shareholders and cannot afford to disobey the regulations. They will take the necessary steps to apply the provisions of the normative act," Pascariu says.
"The impact will be significant among clients at first, who will see big differences between the regular interest and the effective annual interest. In the case of a six month loan, with 28% interest and the usual fee, the EAI will be of more than 60%," Daniel Boaje, head of operations with Credisson, a consumer finance company that operates within the Flanco, Cora, Elvila, Best Computers, Praktiker or Depozitul de Calculatoare, believes.
Displaying the information about the credit costs will not reduce the volume of sales in instalments, says Mihail Laptoiu, head of operations with Domo Retail, the company that owns the Domo chain.
"The 'architects' of the lending products now have one more thing to worry about. The clients will receive much more accurate information. The measure, however, will push those that can have the cash for the acquisition available to reconsider buying with cash," Laptoiu added.
Still under development, the consumer credit will not be affected that much, the other players in this industry believe.
"The first reaction will be negative, especially if the client only looks at the figure without taking the time to see what it is made of: a talk with the loan assistant who will explain that the EAI comprises as much as the insurance, may elicit a positive response, such as 'yes, now I can see what the extra cost is and why.' The cost of the loan is actually the same, and the main issues that made sales on credit attractive have been and still are the zero down payment, getting the product right away and fewer documents," Rodica Preda, Cosmo retail chain's marketing and sales manager thinks.
The effect of this law cannot but be positive in the medium term, says Dan Ostahie the chairman of the Altex Group, which owns the Altex and Media Galaxy retail chains. ionut.bonoiu@zf.ro
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