10 December 2015
INTERNATIONAL PERSONAL FINANCE PLC ("IPF" or the "Company")
IPF NOTES RECENTLY PROPOSED REVISIONS TO VARIOUS CONSUMER LEGISLATION IN SLOVAKIA
Last night (9 December 2015), during the third and final reading of draft legislation relating to sales of receivables, a previously undiscussed proposal to amend various pieces of consumer legislation was tabled in the Slovak Parliament by 15 MPs of the ruling party. The Slovak Parliament adopted the proposals with 78 out of 150 MPs voting in favour. All of the MPs who voted in favour were from the ruling party, SMER.
Included in the proposed amendments are changes to the Civil Code prohibiting contracts for 'ancillary' services that relate to the customer's fulfilment of an underlying agreement. The explanatory note refers explicitly to services consisting of the collection of loan repayments in a customer's home. In addition, new clarification of the existing cost cap wording is included to make it clear that the cap applies to all costs connected with a loan, whether mandatory or not. The level of the current remuneration cap has not changed, at approximately 27 per cent. of issue value per annum.
We understand that other changes include provisions that effectively prohibit instalment purchases of goods and services, vehicle hire purchase as well as refinancing of loans.
IPF is reviewing the draft amendments to assess the extent to which its product structure would be affected by the proposed changes. Based on our current understanding, these changes would mean that all fees that IPF raises in connection with the issuance of a loan, including the fee for home service, would need to be levied at rates consistent with the remuneration cap. Consequently, and if the legislation is to become effective in its present form, IPF's current view is that it would have a material adverse financial impact on its Slovak business and the Company is very actively reviewing the implications of these unexpected amendments. In the 12 month period to 30 June 2015, IPF's Slovak business generated revenues of approximately £43M, profit before tax of approximately £6M and had a net receivables balance as at 30 June 2015 of £43M.
The draft law will now go to the Prime Minister for formal signature and then to the President for approval. The President is from the opposition party. Once received, the President has 15 days to either sign the legislation into law or to exercise his right of veto. Were the President to veto the legislation, it would most likely be returned to a session of Parliament in Q1 2016 and if a majority of MPs voted again in favour, there would be no opportunity for the President to veto it a second time.
According to the current draft of the legislation, it would become effective immediately on publication following signature by the President. Our understanding is that the amended legislation would not have retroactive effect, but that it would apply prospectively in relation to loan agreements already in existence from the effective date of the amendments.
IPF will keep the market updated and further details will be communicated in due course.
International Personal Finance will host a conference call for investors and analysts at 16:30hrs (GMT) today, Thursday 10 December.
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