138 JURIDICA INTERNATIONAL 22/2014
University of Latvia
A Strict Regulatory Framework
for SMS Credit and Its
Effectiveness in Latvia
In Latvia, SMS creditors conquered their market share at the end of 2008 as, in response to the various
ﬁ nancial crises, the banks reviewed their credit policy, setting stricter requirements. In consequence, SMS
credit became more readily accessible than bank credit and there was no necessity to secure the latter. Since
then, SMS credit has become very popular among consumers. For example, in the ﬁ rst half of 2013, non-
bank creditors issued SMS credit for, in total, EUR 97 million.*1 At the time of writing, there are 54 licensed
non-bank creditors in Latvia. Of these, 20 are distance creditors (SMS creditors), 19 are creditors against
pledges (pawnshops), 16 are consumer creditors (providing payments by instalment for goods or services),
15 handle leasing, and 12 are mortgage credit providers.*2
The SMS credit industry is strictly regulated in Latvia; however, as is explained below, the creditors
create new business strategies and tactics and, therefore, are usually a few steps ahead of the legislator.
Moreover, the legislation process is long and complicated, so the problems in the industry are not solved on
the spot. Accordingly, the aim of this article is to provide an overview of the legal framework regulating SMS
credit in Latvia, to assess its effectiveness, and to analyse the relevant case law.
2. Legal and institutional overview
The Consumer Rights Protection Law
*3 sets forth Latvia’s general rules on consumer credit (in Article 8).
With this law, also Directive 2008/48/ EC*4 was implemented in Latvia; however, even though that direc-
tive excludes from its scope those credit agreements involving a total amount of credit less than EUR 200
(in Article 2, part 2 (c)), the Consumer Rights Protection Law does apply to such agreements (see Article
1 Prskats par ne-banku patrtju kreditšanas sektoru 2013. gada I. pusgad [‘Market summary for non-bank ﬁ nancial
service providers, ﬁ rst half of 2013’]. Consumer Rights Protection Centre. Available at http://ptac.gov.lv/upload/2013_par-
skats_par_nebanku_kredit_sekt_1_01_2013_-30_06_2013.pdf (most recently accessed on 1.3.2014) (in Latvian).
3 Patrtju Tiesbu aizsardzbas likums (Consumer Rights Protection Law). – Latvijas Vstnesis [‘Latvian Herald’] 1999,
No. 104/105; 2013, No. 193 (in Latvian). English text available at http://www.vvc.gov.lv/export/sites/default/docs/LRTA/
Likumi/Consumer_Rights_Protection_Law.doc (most recently accessed on 1.3.2014). Please note that not all translations
of Latvian legal acts are updated in line with the latest amendments.
4 Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on Credit Agreements for Consumers
and Repealing Council Directive 87/102/EEC. OJ L 133/66.