Following the political changes of the late 1980s and early 1990s, the Central and East European countries (CEECs) experienced the birth of a new economic environment. A new banking system has been set up and new market players have started to provide a wide range of financial services.
Many of the newcomers concentrated on the most profitable areas of banking operations, which did not include retail finance – at least in the first round. Those institutions that played a leading role in this market segment did not lose their position, but as more and more institutions started operations in the retail field, they acquired a continuously growing market share. These new retail service providers were forced to turn to a wider range of services because of the increasing competition in the corporate market. In addition it is worth mentioning that some consumer credit specialists are also present in the CEECs, and they are looking for ways to expand their business in the region.
Retail markets are becoming more attractive for financial service providers, and the Central and East European countries have had to establish an adequate regulatory environment for this emerging and developing sector. At the same time, these countries have applied for EU membership, the basic criterion of which is compliance with European regulation. Different countries have used different methods to put their law in line with the relevant EU rules.
Therefore, the CEECs will have to comply with consumer-related EU rules and establish policies in this context. Central and Eastern European regulators must make a policy choice: whether to follow a protectionist consumer policy or whether to support the development of free market access, with a satisfactory level of consumer protection. This is a policy decision, but compliance must be reached on the regulatory level: national rules must implement the EU consumer credit directives.
In general there were no common grounds of consumer credit regulation in the CEECs, as the legislative structures were highly divergent and there were no special rules for protecting consumer interests with regard to consumer credit. Therefore the existing European directives constituted the common basis for the candidate countries to establish a new regulatory framework. The European directives follow the principle of minimum harmonisation and leave a certain room for national specialities. In most of the candidate countries, the implementation of the European rules meant a higher level of regulation, and the new consumer credit laws are considered to be more developed than the previous rules.
Harmonisation can be achieved via one of two different approaches. In the first case, the candidate country adopts a separate piece of legislation that contains all the relevant EU-related consumer credit provisions. Most of the countries have followed this approach – Slovenia, the Slovak Republic, the Czech Republic, Latvia and Poland – although they often do a relatively strict implementation of EU directives. Estonia is special in this respect, because it has adopted altogether new legislation – the Estonian Obligations Act – that does not deal exclusively with consumer credit but addresses other more general issues as well.
The second approach is to keep the existing legislation that already deals with consumer credit-related issues, but to upgrade it such that it complies with EU requirements. This could result in a higher level of integration with existing national rules. Hungary and Lithuania follow this approach.
These two approaches represent the most important differences between the candidate countries in amending their legislation on consumer credit. A detailed presentation and assessment of the national consumer credit rules is contained in the separate country reports in Part II. This ensures an accurate introduction to the newly adopted regulation. The statistical annex presents additional data, organised by country.
There have been already some attempts to assess the state of consumer credit regulation in the candidate countries. What distinguishes this study from these former assessments is that the present work is the first effort to give a comprehensive, country-by-country evaluation of the adopted consumer credit laws (except in the case of Bulgaria and Romania where this work is planned for a later stage). The main reason for this is that – although implementation is executed on the basis of ‘law harmonisation programmes’ – most of the candidate countries could only adopt their new consumer credit laws in 2000 and 2001.