FM: Capping Interest to Help Avoid Croats becoming Debt Slaves

Minister to call for tighter regulations and laws to prevent Croats becoming ‘modern day slaves’ to the banks…

Speaking during a radio interview on Monday, Minister of Finance Boris Lalovac says that personal and company debt has spiraled out of control and says that a new draft law has been proposed which will see default interest on consumer loans capped at a maximum of 10.35% percent, and 8.35% on housing loans.

Lalovac says that interest rates, particularly default interest, is a large problem for citizens and businesses and something needs to be done.

“The debts of individual citizens and companies in Croatia have exploded and the state must act in order to protect them from modern-day debt slavery”, said Lalovac, adding that HRK 59.6 billion currently had been blocked because of debt, of which HRT 32.4 billion was from small businesses and companies, and HRK 27.1 billion was from personal debt.

Lalovac said that 44% of the capital sum (HRK 12 billion) was interest charged on arrears, and that creditors would not be able to collect the interest on debts, let alone the principle amount.

The president of the Croatian Banking Association (HUB), Zoran Bohacek, said that whilst in theory the Minister’s plan made sense, he could not see it becoming a reality.

“The government must protect the weak, but this is a wrong way. Croatian banks must operate in compliance with European Union rules,” Bohacek said.