Poland To Cap Rates At 26%
15th July 2005

Poland is on the verge of introducing a cap on interest rates following approval of the measure in both its lower and upper parliaments. The proposal, which would cap rates for all borrowers at four times the bank base rate (currently 6.5%) is now with the President for approval and is likely to be introduced in the near future.

The measure threatens to destabilise Provident Financial's business in Poland (this is currently its major international market), although the company has insisted that it can restructure its loans to evade the impact of the cap.

The proposed cap would be one of the tightest in Europe, but follows a format supported by Debt on our Doorstep of floating the cap as a mutiple of the bank base rate (see our paper Reducing the Cost of Credit to Low Income Households: The Case for a Cap, available from the policy pages on this site). Whether the proposals in Poland are effective enough to prevent lenders from evading the cap is not known at this time but will be put to the test by Provident as they seek to evade the intention of the Polish Parliament to reduce the cost of borrowing for low income households.

The decision of the Polish Parliament also reflects their rejection of the findings of the Policis research commissioned by our own DTI. In September 2004, Policis participated in a seminar in Poland advocating against the use of interest rate ceilings, and their report was made available to Polish M.P's.

Debt on our Doorstep extends its support and admiration to those campaigners in Poland who have brought about this measure and looks forward to continuing to build links across Europe and internationally in the growing campaign for responsible lending.