The Ministry of Finance plans to change the regulatory regime for providing consumer loans in the Czech Republic by adopting a new Act on Loans for Consumers, which shall replace the current regulation in this area.

In particular, it is proposed that the Czech National Bank, which is the competent authority to supervise financial institutions such as banks, insurance companies and investment funds, shall also supervise consumer loan providers and intermediaries. Furthermore, the requirements for obtaining a license to provide and/or intermediate consumer loans shall be made significantly more restrictive.

Although the proposal of the new legislation has not yet been made public and we cannot yet provide details of the new requirements, according to the Ministry of Finance one of the aims of the new legislation is to radically reduce the number of licensed consumer loan providers and intermediaries.

Stricter regulation of this area is deemed appropriate as the licences are currently granted to anyone with clean criminal record and high school education or three years of practice in the field of providing and/or mediating consumer loans. As a result, there are currently more than fifty thousand licensed consumer loan providers and intermediaries in the Czech Republic, and the lack of their effective regulatory oversight is to the detriment of consumers.

As the procedure for passing new legislation is generally quite lengthy in the Czech Republic and the draft legislation has not yet been submitted to Parliament, the new regulatory regime is not expected to become effective before Q2 2016.