The Prague Post
http://www.aaaradiotaxi.cz/index.php?xSET=lang&xLANG=2
November 22nd, 2008
Endowment Fund     Business Listings ONLINE      Reservations      Classifieds    Subscriptions
Prague accommodation

Home » Archives » Business

Prague warns of Christmas debt

Campaign highlights risks of financing festivities with credit

By Victor Velek
Staff Writer, The Prague Post
November 28th, 2007 issue

COURTESY PHOTO
Posters urge rational holiday shopping.
Christmas is knocking on the door and people are getting ready to thin out their wallets in the annual rite of year-end shopping fever.
Boosted by a burgeoning economy, Czechs are becoming more lavish in their shopping, especially when Christmas approaches — holiday spending this year will even surpass that of wealthier counterparts in Western Europe, according to a recent report.
The average Czech intends to spend 506 euros ($749/13,551 Kč) on Christmas celebrations, 306 euros of which will be used to buy gifts, according to a survey by the consulting firm Deloitte. That’s more than the average German and Dutch budgets of 420 and 411 euros, respectively.
This excessive and often irrational Christmas spending is not good news and threatens to sink consumers into a swamp of debt come springtime thaw, financial experts and politicians warn.
“Driven by good intentions to make their kids and relatives happy during Christmas, many people take unfavorable high-interest consumer loans,” said Jiří Janeček, a city councilor in charge of social and housing issues.
To reduce the number of people sinking into debt, Janeček and Prague City Hall are kicking off a campaign warning against impetuous shopping on credit. Beginning Dec. 1, posters appealing to rational Christmas shopping will appear on advertising benches near select malls throughout the city, according to Janeček.
These posters will be accompanied by newspaper ads, advertising screens on metro platforms and anti-debt themed pocket calendars.
Prague is preparing the campaign in cooperation with the Association of Citizens’ Advice Centers (AOP), an umbrella organization of centers providing free counseling on a variety of social issues. For two years, the association has been striving to increase the financial acumen of consumers.
AOP launched a pilot project introducing debt counseling in several centers in 2005, said Michal Kaderka, AOP’s PR manager. The expansion of the concept — a three-year project starting next year — will spread debt counseling to 40 centers throughout the country.
The Prague campaign is a prelude to it, Kaderka added. Posters will direct Praguers to the association’s four local centers, where they can get advice on budget-planning and suggestions on solving existing debt problems.
“We don’t say to people they shouldn’t take loans; nor do we say, ‘This loan is better for you than that one,’ ” Kaderka said. “We only point to the possible negative consequences of shopping on credit.”
The campaign’s purpose is purely to protect consumers against irrational shopping on credit, and is not intended as a salvo against banks and other loan providers, Janeček added.
“Low-income households, especially, can become easily over-indebted because of their low level of financial literacy,” he said.
Growing tab
By September, households owed a total of more than 655 billion Kč to banks and further tens of billions to nonbanking institutions, with mortgages accounting for most of the sum, according to the Czech National Bank (ČNB).
Although personal debt in the Czech Republic is still well below the average levels in Western Europe, the figure is rising 30 percent each year. This has led more people to have trouble repaying their loans, especially consumer credits, the ČNB said.
While in 2004 there were 155,000 court-ordered seizures, in 2005 the number soared to 270,000 and then to 309,000 last year, according to ČNB statistics.
The country’s relatively recent introduction to consumer credit has been abused by some lenders offering usurious loans and taking high fees for minor delays, said Jana Teplá, a lawyer at the Czech Consumers Defense Association (SOS).
Earlier this year, for example, SOS filed a complaint against credit office Finpomoc.cz and its partner arbitration company for fraud and usury.
Most loan providers welcome the Prague campaign, and would like to see more progress made in educating borrowers against dubious and excessive credit. ČSOB, one of the country’s largest banks, is even financing the expansion of AOP’s counseling services over the next three years.
“Our goal is to have content clients, not heavily indebted clients,” said Ondřej Škorpil, head of the ČSOB CEO’s office. The bank will support the AOP debt-counseling project with 9 million Kč, he added.
The debt campaign has been praised by other financial companies surveyed by The Prague Post. Volksbank as well as the consumer finance firms Cetelem and Home Credit have welcomed these steps toward financial enlightenment.
“It’s right to point out the risks of excessive indebtedness and encourage people to assess their financial limits before they take credit,” said Home Credit spokeswoman Olga Mužíková.
The campaign has another, more subtle goal. The spirit of Christmas is often overwhelmed by the shopping frenzy. People think that they need to express their love of their relatives through expensive gifts, Kaderka noted.
“This is an unfortunate concept and the campaign should single that out,” he said.

Victor Velek can be reached at vvelek@praguepost.com


Other articles in Business (28/11/2007):

Browse the Current Issue

If you enjoyed this article, why don't you subscribe to the print version!
We accept secure online transactions provided by PayPal and Moneybookers

Be the first to add a comment!


Full Name: *
City: *
E-mail: **
This comment can be published in the print version of The Prague Post
Enter the text on the right:
 visual captcha
Comment: *
* Required field. In order to be approved for display, comments must have a first and last name and a city.
** E-mails are required and will only be used for internal purposes.

Most visited in Business Listings

Hotel booking
The Prague Post Online contains a selection of articles that have been printed in
The Prague Post, a weekly newspaper published in the Czech Republic.
To subscribe to the print paper, click here.
Unauthorized reproduction is strictly prohibited.