People will still be able to buy phones on installment plans, but for some, the choice may narrow, especially when choosing newer and more expensive devices.
“Today, a phone is not a luxury item, but a daily tool for work, learning, communication, and using various services. The ability to spread the cost of the device over a longer period has traditionally been very important to people – as much as 70% of phones at ‘Bitė’ are purchased on installment plans. The most popular choice is to pay for the device over two years. The changes do not mean that it will no longer be possible to buy phones on installment plans, but some people may have to choose a cheaper device,” reveals Giedrius Senkus, Director of Purchasing and Products for Wholesale Clients at “Bitė Lietuva.”
The installment system will change fundamentally
Until now, telecommunications companies could use an exception under which consumer credit requirements did not apply to contracts where no interest or other fees were charged for the credit. This allowed phones and other communication equipment to be offered to customers on installment plans under more flexible rules.
“From November 20, the situation will change. With the new European Union consumer credit directive provisions transposed into Lithuanian law, this exception is removed. This means that when buying a phone on installment without interest and other fees, a person’s creditworthiness must be assessed. We will have to evaluate the person’s income and all their financial obligations,” says the Director of Purchasing and Products for Wholesale Clients at “Bitė.”
As a result, for some customers, especially those who already have larger financial obligations, the amount for which they can purchase a phone on installment may decrease. In such cases, instead of the desired newest or more expensive device, they may have to choose a cheaper model.
A special exception applies
Typically, a 40% limit applies to consumer credits – a person’s average monthly payment for all financial obligations cannot exceed this portion of their monthly income. A more flexible exception is provided for phones and some other communication equipment. When buying a phone, modem, or router on installment without interest and other fees, this limit can reach up to 60% of a person’s monthly income.
“This is an important exception and relief for Lithuanian people. However, even with the higher limit, creditworthiness assessment will become mandatory – more information about the client’s financial situation will be evaluated. For some people, this may mean a narrower choice – especially when choosing the newest and more expensive devices,” says one of the digital services company’s leaders, G. Senkus.
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