March 2006, L. Dupal1 Consumer Campaign READ BEFORE YOU SIGN ! Czech Consumer Association Libor Dupal

March 2006, L. Dupal2 Starting points (1) More and more citizens in the country use consumer credits, financial loans, mortgages etc.; The financial services products are preferably used by such households whose allowance and budgets are relatively low;

March 2006, L. Dupal3 Starting points (2) Consumer is generally a weaker party in the contractual relation; Consumers do not have necessary theoretical knowledge or practical experience for concluding contracts; Consumers are not vigilant and cautious enough; they do not read attentively the contractual conditions.

March 2006, L. Dupal4 Priorities of CCA Participate on expert basis as a defender of consumer interests and rights; Develop consumer protection on the basis of PREVENTION (incl. approval process of laws, development of standards etc.); Provide assistance and advise with special attention paid to the disabled, the elderlies etc.; Provide education and training (CCA accredited by the Ministry of Education).

March 2006, L. Dupal5 Consumer borrowing in the CzR What were the trends in Czechia in ?

March 2006, L. Dupal6 Growth in Czech consumer credit

March 2006, L. Dupal7 Increase of mortgage During these 2 years the mortgage increased 2.5 times from 51 bn to 120 bn CzK ( 1.7 bn to 4 bn). Source: CNB and Credit Counselling Service

March 2006, L. Dupal8 Household lending During these 2 years the mortgage increased 2.5 times from 51 bn to 120 bn CzK ( 1.7 bn to 4 bn). Source: CNB and Credit Counselling Service

March 2006, L. Dupal9 Household lending Growth in loans to non-financial corporations: +7.5 % Growth in loans to households: % of which Mortgages: % Building society loans: % Consumer credit: % Loans to households: 28.0 % of bank loans at end 2004 compared with 22.2 % at end 2003 Source: CNB and Credit Counselling Service

March 2006, L. Dupal10 Concerns over indebtedness “The uncertainties and potential risks include fast growth in lending to households, which is leading to a gradual increase in their indebtedness. Growth in mortgage loans is particularly sharp. The interest burden on households is also rising.” Czech National Bank, Annual Report 2004

March 2006, L. Dupal11 Consumer loan credit quality “In the case of consumer credit, households’ discipline as regards repaying loans on time and in full is significantly worse….. Their quality has steadily deteriorated, and the share of classified consumer loans in total consumer loans exceeded 12% in mid ” Czech National Bank, Financial Stability Report 2004

March 2006, L. Dupal12 Assessment based on domestic data Grounds for concern: High growth rate relative to wages & salaries / GDP High growth relative to other types of lending Consumer inexperience with credit / risk of debt? Grounds for reassurance: Growth from a very low base Strongest growth - mortgages Main lenders - Int’l banks & finance companies with significant experience from home markets Improving infrastructure (e.g. credit registers) (Source: Credit Counselling Service)

March 2006, L. Dupal13 Objectives of the Campaign Open publicly the issue of the risks; Develop awareness raising outputs to warn consumers against imprudence; Develop information and education campaign

March 2006, L. Dupal14 Forms of Performing Campaign A seminar in the Czech Parliament and others in various regions; Booklets and newspapers (conclusion of contracts); Awareness raising spots on TV and radios; Advertisements published in newspapers; Participation in discussions (TV, radios).

March 2006, L. Dupal15 Examples of Performing Campaign

March 2006, L. Dupal16 Examples of Performing Campaign

March 2006, L. Dupal17 Examples of Performing Campaign TV SPOT

March 2006, L. Dupal18 Examples of Performing Campaign Booklet – detailed information on consumer contracts in financial sphere (credit, loans, mortgage …); Special issue of our consumer newspapers Konzument-Test.

March 2006, L. Dupal19 NEW CONSUMER CREDIT DIRECTIVE LOOKING FOR THE POSITION OF THE CZECH CONSUMER ASSOCIATION

March 2006, L. Dupal20 NEW CONSUMER CREDIT DIRECTIVE CCA prefer (1) Mortgage to be directly covered by the new Act; APR ideally should be calculated in a uniform manner –incorporating all the cost elements linked to the credit contract; Appropriate pre-contractual information should be provided;

March 2006, L. Dupal21 NEW CONSUMER CREDIT DIRECTIVE CCA prefer (2) Maximum rates should not be necessarilly included; Possibility for consumers to withdraw from the credit agreement within 14 days; Possibility for consumers to repay their credit earlier; (compensation to the creditor?) Total harmonization should relate just “core issues”; (mutual recognition issue).

March 2006, L. Dupal22 Thank you for your attention ! Libor Dupal Sdružení českých spotřebitelů