2024 Responsible Lending Index: Exposing Predatory Loan Shark Behaviour

The overall ranking system of the Responsible Lending Index is determined not only by price, but also by the availability of important information, as well as the clarity of advice on what to do in case difficulties with repayment and other criteria.

The best institutions received four stars. Three stars were awarded to those that met most of the Index’s criteria and are still acceptable. Finally, those that met only some or none at all of the required criteria were given one or zero stars. Potential clients should be extremely wary of taking out loans with these low-ranking institutions. Ideally, they should avoid taking out loans with them entirely. 

The winners of this year's Index are Air Bank and Zonky, scoring 93 points each, closely followed by mBank, Česká spořitelna and Komerční banka. 

"All of these companies provide loans at affordable prices, while being transparent and generally client-friendly," says David Borges, our analyst and one of the authors of the Responsible Lending Index. "Three non-banking companies also made the top ten, demonstrating that not all non-banking companies are problematic. It’s also clear that companies that pay attention to our feedback and make an effort to improve outperform their competitors," he adds. 

How much does a loan cost?

The starting point for our price comparison model works with a CZK 50,000 (€ 2,000) loan repaid in regular instalments over the course of two years. The interest rate on this type of loan is usually between 10% and 15% per annum at the best ranking companies. The total cost, i.e. the amount by which you will overpay the loan in two years, is around CZK 10,000 (€400). 

The best non-banking companies are often somewhere in the middle – not great, but not terrible – and tend to charge something like CZK 20,000 (€800) to CZK 40,000 (€1,600) for the same loan. 

At the bottom of list are providers who charge 100% (or more) per year for a loan. This means that the borrower can expect to pay back double of what they borrowed or more within the span of two years. 

The most expensive long-term loans are currently provided by CFIG Credit, ViaSMS or FlexiFin. The interest rate for some of these companies is as high as one per cent per day, meaning that some clients can expect to overpay their loans by up to five times the original amount in two years. 

"More expensive loans can be justified. There's a simple equation in lending money: the higher the risk that the borrower not being able to repay the money, the more expensive the loan. However, if the lender charges a price that requires the borrower to repay twice the original amount or more, this often causes the borrow to default on the loan and fall into a debt trap," explains Borges. 

Repayment problems

In addition to their high interest rates, some loans are inappropriate by design. For example, CFIG Credit offers loans where only the interest is paid in monthly instalments and the principal sum borrowed has to be paid as a one-off sum at the end. Conventional revolving loans – where the borrower only pay the minimum amount – can be problematic as well as the total debt decreases very slowly, if at all. 

"Before taking out a loan, the borrower must carefully consider whether he or she can make the monthly repayments. The same applies to lenders, however. They have a legal responsibility to assess whether the borrower has the ability to repay the loan. However, some lenders are lax with this obligation. They do not ask for proof of income and sometimes do not even check their borrowers' liabilities with various credit registers," notes Borges. 

The quality and availability of information for people who default on loans is improving. Companies who are serious about responsible lending are publishing detailed advice on their websites and taking the time to explain to customers what they can do if they cannot repay a loan. 

However, it’s always important for clients to review the statutory penalty charges – fees that can be added to a debt in case a client defaults on payment. Many non-banks have these items in their price lists. Among banking institutions, s this applies only to ČSOB, Fio Banka and Inbank.

The sneakiness of website calculators

The calculation of prices is another problem. Lenders usually present interest rates on their websites with a meaningless phrase "starting from". However, the actual cost of a loan can be much higher than the attractive figure shown on the loan calculator.

Therefore, we are now focusing on the relationship between the interest rate that companies advertise and the rate they typically lend at. "For some companies, this “measure of dishonesty” is quite high. The worst performers in this respect are FlexiFin, Creditea and Kimbi," explains Petr Sládek, co-author of the Responsible Lending Index. He advises loan applicants not to be guided only by the interest rate, but also to look at the APR (annual percentage rate of charge), a parameter including potential fees in addition to interest. 

Will the law put a cap on really expensive loans?

Extremely costly loans could completely disappear altogether from the Czech credit market within the next two years, as mandated by European consumer protection legislation. The respective law is currently being discussed.  

"The option that makes the most sense to us is based on established case law. That is, on the notion that the average annual rate of charge should not exceed the usual bank interest rate or a similar parameter by more than four times," says Daniel Hůle, Head of PIN’s Debt Advisory Programme. "At the same time, we can imagine that for small and short-term loans this limit could be supplemented by some kind of a flat rate to cover the lender's necessary costs," he adds.

Protect yourself from loans with obscenely high rates! Loan validity can be checked quickly and easily with our new tool Lichvolapka (the Loan Shark Catcher).

In case of financial problems, we recommend looking for solutions rather than taking out more credit. Even though lenders promise to help solve your financial difficulties, some of them are not to be trusted. You can consult our advisors via our help line at: 📞+420 770 600 800.

Criteria and weights for each parameter:

Loan cost 20%

Default costs 20%

Calculator quality 5%

Pricing transparency 6%

Contractual documentation 5%

Assistance in case of problems 7%

Default costs quantification 2%

Limitation period modification 5%

Free first loan 5%

Use of direct enforceability clause 5%

Recovery of time-barred claims 5%

Use of form claims 5%

Use of credit registers 10%