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A Lawsuit to be Filed against Online Loan Companies

A Lawsuit to be Filed against Online Loan Companies

A group of citizens appealed to  the National Bank of Georgia with the requirement to introduce the regulation in  the activities of microfinance institutions that issue loans  on enslaving conditions.

“No online loans” – an appeal under this title has already collected more than 3500 signatures. The initiator of the campaign is an ordinary citizen Beka Mchedlishvili. He intends to bring a lawsuit against the online loan companies and demands the imposition  of certain regulations restricting interest on loans and fines for overdue payments.

“We need the introduction of regulations. The  loans must not be given to 18-year-olds who do not even work. Loans should only be issued to solvent persons. Overall, this business is absolutely wild and uncontrolled,” he says.

Currently, online lending business did not fall under any regulation typical for other segments of the financial sector. Online companies do not have a supervisory body which would control  their activities.

On this basis, a non-governmental organization “Society and the banks” also requires the introduction of a number of regulations, although the industry should not suffer as a result of their imposition.

Now online loans are not regulated, despite the fact that they are engaged in financial activities. They are governed by the law on the enterprise activity, and for example, in regard to the fines, they have no limits on the amount and may define any penalty. However, it should be noted that this practice is similar to the world.

Especially when  a significant part of the companies working in our market  are  subsidiaries of foreign companies. Accordingly, their activities are fully consistent with international standards,” the lawyer of the NGO David Kikvadze explains.

However, he believes that the sector needs to be regulated.

“Online credit companies make loans at such high interest and work on such a large profit margin that it would be good to introduce regulations. But this must be done so as not to harm the business. In Georgia, there are more than 10 online companies, many employees work there, so the extra regulation should not harm the business,” he says.