New law to protect consumers from "Take a Loan!" ads

Knesset committee passes bill to require banks and other lenders to include warning on loan ads.

Hillel Fendel,

Uriel Lederberg
Uriel Lederberg
Paamonim


The Knesset Economics Committee has voted to approve a bill banning advertisements for loans that do not specify what awaits those who fail to pay up.The bill has passed its first Knesset reading, and is now, with the approval of the relevant Knesset committee, ready for its final Knesset votes. The bill is expected to garner a majority in the legislature and become law.

The bill obligates banks, credit companies and other lenders to include a clear warning in their advertising regarding the ramifications of failure to repay the loan. The warning must read as follows: "Failure to meet the conditions of payment is liable to lead to legal expenses, fines, confiscation of bank accounts and execution-office proceedings."

The bill was actively supported by the Paamonim organization, which counsels and helps families in debt regain their financial footing. Paamonim stated that "although loans have the potential to significantly harm the borrowers, we have been witness in recent years to increasing numbers of ads for loans, by banks and other lending institutions."

According to Paamonim, Bank HaPoalim spent NIS 323 million (roughly $80 million) on advertising and marketing in 2014, and Bank Leumi spent NIS 280 million. Research has shown that loan advertising can have a strong effect on consumers, especially when they feature women or the boast of a 25% discount on interest rates.

"The granting of credit is important," Paamonim stated, "but not when it is provided for the wrong reasons or when it is taken impulsively without prior thought and planning. When taken as a result of aggressive and misleading advertising, it can cause great economic harm to the borrower. The borrower must borrow only after having received trustworthy and objective advice."




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