Personal Loans Market in Poland - PwC

Personal Loans Market in Poland

Table of Contents

Foreword by Professor Witold M. Orlowski, PwC's Chief Economic Advisor in Poland

04

1. Introduction

06

1.1. Background

06

1.2. Objective scope of the report

08

2. Market and its participants

11

2.1. Personal loans market in Poland

11

2.2. Personal loans market: customer profile

14

2.3. Business model of a personal loan company

19

2.4. Segmentation of personal loan companies

20

2.5. Amount and structure of loan costs

25

3. Consumer practices

30

3.1. Practices of personal loan companies with regard to customers based on the 30 Mystery Shopper study

3.2. Company's responsibility: formalities, processes and procedures

32

3.3. Customer's responsibility: awareness and knowledge

36

3.4. Service quality: providing information about the product and customer service 38 standards

4. Analysis of the systems regulating operation of personal loan companies in Poland and 44 abroad: best practices

4.1. Licencing and supervision

44

4.2. Annual Percentage Rate limits

48

4.3. Regulations concerning liability to consumers

50

4.4. Debt recovery

52

4.5. Withdrawal from the agreement

55

5. Summary: key findings for the personal loans market in Poland

56

6. Glossary of terms

60

Personal Loans Market in Poland 3

Foreword ? by Professor Witold M. Orlowski, PwC's Chief Economic Advisor in Poland

It is with pleasure that we present the readers with this report on the activities of personal loan companies in Poland. Despite the mixed feelings of the public, the sector is an important participant of Poland's financial market. It provides access to financial services to those consumers that for various reasons cannot take advantage of banking services because of their limitations or lack of appropriate products.

4 Personal Loans Market in Poland

High costs of loans provided by the personal lending companies are often the reason for their negative public perception. The reasons for applying such costs are usually the same reasons for which the customers of personal lenders are overlooked by the banking sector. The borrowed amounts are usually small, which translates into relatively high overhead costs, and the customer group is often associated with higher risk. Since banks have to protect the value of deposits entrusted to them by customers, they cannot engage themselves in such activities. On the other hand, the personal loan companies described in this report risk the funds of their shareholders, who are conscious of the higher risk as it is an imminent part of their business model.

In this study, we conduct a multifaceted analysis of the personal loan companies operating in Poland. The objective of the analysis is, firstly, to describe the operations of the sector with as much precision as possible; secondly, to identify potential effects of various regulatory measures. Thus, the analytical part of the report contains a description of the market in which personal lenders operate, as well as a description of regulatory solutions applied in other countries and planned in Poland.

As part of the description of the market, we also included a description of the customers of personal lenders as well as their current business models; furthermore, thanks to the Mystery Shopper study conducted for the purpose of this report, it was possible to describe the real interactions between the lenders and their customers. The description of regulatory measures includes not only the information about the existing and planned measures, but also the opinions of the interested parties on the planned amendments.

The analysis led to several important conclusions:

? There are three segments of companies operating in the personal loans market, each representing companies of a different business model determining the cost and availability of the loan to the customer and therefore the product and services offered to the market.

? Most of the companies covered by the report strive to provide its customers with fair and clear information on the costs and other terms and conditions of the loans; this however does not mean that all customers are able to fully understand the meaning of the signed contractual provisions.

? Any potential changes in regulations should take into account the aforementioned conclusions to ensure that the amended regulations protect the rights of customers and fair competition on the one hand, while avoiding liquidation of the market on the other.

? Besides the potential changes in legislation, self-regulation of personal loan companies may also play an important part in the personal loan market, with such measures as establishing a code of conduct in dealing with the customer to be adopted by the whole sector, or education campaigns among the customers.

We hope that the results of the analysis presented in this report, as well as the conclusions and recommendations, will make a valid contribution to the current debate about the best solutions regulating personal lenders' operations in Poland.

Personal Loans Market in Poland 5

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