Consumer Rights Protection Centre (CRPC) penalizes JSC “Mogo” for providing consumers with loans without enough solvency assessment, as well as irresponsible text message delivery promoting irresponsible borrowing.
Consumer Rights Protection Centre (further - CRPC) on June 12, 2018, regarding protection of consumers’ collective interests’ case made a decision to fine JSC “Mogo” (further – the Company) EUR 80 000 for systematically ignoring the need to assess the consumers’ ability to repay loans. It has been ruled that the Company must stop all unfair commercial practices by developing and approving a detailed and traceable system regarding consumer ability to repay loans, as well as to begin applying solvency assessment according to Consumer Rights Protection Law (further – CRPL).
CRPC on May 29, 2018, ruled JSC “Mogo” to be fined with 12 000 EUR for participation in professional misconduct and misleading commercial practices that promote irresponsible borrowing by sending messages such as: “CONGRATULATIONS! You have attained a loan worth EUR 425 without lien for the period of 36 months! Your monthly payment will be only EUR 25.58! To receive the loan call: +37166900900”.
1. The decision concerning the infringement caused by neglect towards evaluation of consumer’s ability to repay loans.
CRPC during the case investigation recognized, that the Company has participated in professional misconduct by not following the CRPL and ignoring the need to provide the necessary solvency assessment as well as systematically ignoring consumers’ ability to repay loans by:
Granting loans to consumers, while taking in to an account unofficial and unverifiable income, thus surpassing maximum allowable amount of credit payments;
Granting loans to consumers, completely ignoring their ability to repay the credit by assessing solely on guarantor’s bank account statement.
Not developing a proper system of how-to asses a consumer’s ability to repay loans, which would assure a detailed, traceable loan granting procedure which would comply with the relevant legislation and is based on a true and sufficient information about the consumer’s income and expenses.
CRPC stresses, that it is very important, that the consumer’s solvency assessment is based on the consumer’s true income, without creating additional risk that the consumer might need to mortgage or sell their property in order to repay the loan or might need to significantly reduce their everyday expenses for their basic needs. All in all, lending to consumers is a necessary service, however solvency assessment procedures should be reliable enough to help avoid giving loans to consumers, whose economic situation might worsen because of it.
Acknowledging that the Company did not admit to the infringement, did not show any initiative to improve the situation or try to avoid creating additional infringements, instead, the Company clearly pointed to the fact that the recommended actions might cause the Company’s borrowers to lessen in number, since the consumers who don’t correspond with the safety precautions won’t be able to take more loans. CRPC made a decision in order to stop and avoid the repetition of the infringement.
2. The decision concerning participation in professional misconduct by sending out text messages that promote irresponsible borrowing
CRPC on 29 of May, 2018, made a decision based on protection of consumers’ collective interests’ case to punish the Company with a fine of 12 000 EUR on the account of participation in professional misconduct (based on the Law on the Prohibition of Unfair Commercial Practices and Rules of Cabinet of the Ministers of the Republic of Latvia No 691 “Provisions for consumer crediting”) and misleading commercial practices that promote irresponsible borrowing by sending messages with a slogan: “CONGRATULATIONS! You have attained a loan worth EUR 425 without lien for the period of 36 months! Your monthly payment will be only EUR 25.58! To receive the loan call: +37166900900”. (further – the Commercial)
The Company, by sending their clients and potential clients messages with such texts as “CONGRATULATIONS! You have attained a loan...” clearly indicates that the client has attained a loan which they had not signed up for. This Commercial and a Commercial with a similar content delivered electronically from October 31, 2017 until November 3, 2017, had been sent to a large amount of clients or potential clients (more than 28 000). CRPC concluded, that by receiving this type of Commercial, it could influence the client’s economic actions, because it makes an impression, that without the client’s consent, application and solvency assessment, they have already attained a loan. To find out information about the means of loan attainment and understand the reasons behind the information received, the client might have made the decision to visit the Company’s website, contact the given telephone number or other actions that would eventually motivate them to receive a loan.
CRPC, acknowledging the manner of the Commercial’s presentation and by evaluating its content, concluded that the Commercial directly deceives the consumer about loan attainment, consequently impacting the person’s economic actions in a negative way.
CRPC stresses that the Company, as a professional in consumer credit industry which implements commercial practices, must act in good faith and respect all applicable regulatory acts, including, fairly following the Company’s internal procedures and, accordingly, before signing respective loan contract, evaluate the consumer’s ability to repay the loan.
Consumer Information and Communication Division
Santa.Zarane@ptac.gov.lv, 67388622, 22006628
Date of publication: 04.07.2018.