The laws existing in the Republic of Moldova do not contain provisions that would protect debtors from extraordinary and systemic economic-financial shocks, said PAS MPs who proposed a bill aimed at limiting the total cost of a loan in a reasonable way, IPN reports.

In a press briefing, the head of the Parliament’s commission on economy, budget and finance Dumitru Alaiba said the bill sets down minimum standards for assessing the creditworthiness of consumers of loans that are called “responsible lending requirements”. The financial institution, either the bank or the microlending company, will have to appropriately assess the creditworthiness of the applicant for loan and the capacity of this to repay the loan.

The assessment should be based on the presumption that the loan recipients will be able to honor their obligations, avoiding the business model when money is lent to a person knowing that this will be unable to repay the money so as to take the debtor’s property later. The surveillance authorities, the National Commission for Financial Markets or the National Bank of Moldova, will determine the responsible lending indicators.

The bill imposes requirements concerning the total cost of the loan, which should be reasonable and should respect the requirements of the correct commercial practice and should not distort the balance between the loan recipient and the bank. The interest rate in the loan agreement is capped at 50%, while all the other costs, such as commissions and delay penalties, will not exceed 0.04%.

Dumitru Alaiba said such provisions are necessary as Moldova does not have clear standards for assessing creditworthiness and some of the financial products predispose the consumers to undertake commitments that they cannot honor. Also, there are insufficient guarantees for ensuring responsible loans.