Within two weeks, it had several thousand applicants willing to try the nascent service. Other banks already have plans to follow GE's lead.

"The purpose of the consolidation is to syndicate all payments that a customer needs to repay loans into just one," said GE Money Bank spokeswoman Eva Chaloupková. "This will ease clients' orientation in their debts."

Until recently, local commercial banks considered customers with mounting debts a bit of a burden. Now, those customers are being seen as a new business opportunity.

Banks in the past only offered to consolidate debts within an individual bank. Overall household debt has been rising, and people are taking out multiple loans with multiple institutions like never before. The fight for this growing clientele has become the latest front in the ultracompetitive banking market.

GE Money Bank will take on customers' debts from other banks and enable them to set a new timetable of repayments ranging from two to 10 years.

Existing GE customers are able to consolidate loans worth up to 200,000 Kč ($8,877). New customers are limited to 150,000 Kč.

GE is quick to note that this concept is nothing new, but it is a first for Czech banks.

"Following the experience from West European countries, we expect a further rise in the interest in consolidated loans in the future," Chaloupková said.

Similar plans

Competing banks will be launching their own external consolidation services very soon; bankers expect the new service to become another arena for competition.

Česká spořitelna spokeswoman Helena Matuszná said loan consolidation is already a part of the bank's development business strategy. It is preparing to start offering the service soon.

"It is an attractive option for a certain group of clients," she said.

Citibank is already testing a pilot project focused on refinancing loans, and that intends to launch its service within several weeks, according to spokeswoman Markéta Dvořáčková.

"Debt consolidation will become quite popular here," she said. "Through consolidation, loan recipients will be able to upgrade the conditions of their standing loans."

In a first sign of competition in the nascent service, Citibank will offer refinancing of particular loans totaling up to 600,000 Kč — three times more than GE Money Bank's upper limit.

HVB Bank spokeswoman Petra Kopecká downplayed the importance of refinancing in the banking war. She said that not all customers would need to use the service, and customers with huge debts would be disqualified.

"The bank cannot satisfy all customers who express an interest in loan consolidation," Kopecká explained. "It is essential that the applicants do pay back their standing loans, which is, however, not happening in all cases."

Banks are able to monitor customers' payments through banking and nonbanking loan registers, which were launched in 2005. The registers were developed in order for banks to be able to know whether a potential loan recipient already has a large amount of debt.

Dangerous trap

Česká spořitelna's Matuszná did not rule out the register being misused by banks looking to pull customers from other institutions.

"Should the register serve as a source of information for consolidation, it would be a clear violation of its original mission — to help avoid excessive debt," Matuszná said.

Despite the fast-rising overall debt of Czech households — which reached an all-time high of more than 500 billion Kč in late September — local banks are still eager to give out new loans.

"About 50 percent of people have never taken out any loan, so there's still enormous potential for giving out new ones," Matuszná said.

In some European Union countries, the share of household total debt equals its gross domestic product. It was still only 39 percent in the Czech Republic in 2005.

The impending holiday shopping season annually increases the demand for banking loans by 30 percent, said Citibank's Dvořáčková. The introduction of loan consolidation just before the spending sprees was done on purpose, she said.

Commercial banks' new campaigns aimed at attracting loan recipients could be tricky for customers, said the Czech Financial Arbiter Otakar Schlossberger. He warned that ads could encourage people to take on an excessive debt.