Credit management company SIA Paus Konsults and the developers of legal entities’ database Firmas.lv have conducted a study to found out how many owners and executives of companies registered in Latvia’s Commercial Register have problems with their personal credit payments. The results of the study show an increasing number of company owners with unsettled debts in the database.

The study used information from database Firmas.lv, which, in turn, contains data from the Enterprise Register, and its entries were compared with the information on delayed payments from debtors’ database Risk.lv of SIA Paus Konsults.

There are private individuals behind each company. They are its owners and managers who, like any other natural person, may have a positive or negative credit history. When Latvia’s economic situation dramatically improved, many of them started business. It was a good time for building, trade and delivering various services, as banks were supportive of and offered various packages to those starting a new business: cash loans, consumer loans, overdrafts, credit lines etc. Yet already at that time many credit institutions were cautious enough and asked the loans being issued to legal entities to be guaranteed by companies’ owners and executives. Now, in economic crisis, when companies are unable to meet their obligations to creditors, these individuals are to assume liability for the loans they have guaranteed.

The results of the study show this is the main reason why many owners and executives of companies have found themselves in the debtors’ database now. Still, it cannot be denied that many entrepreneurs show a negligent attitude to settling their personal liabilities, and these cases also make statistics.

From now on customers of Paus Konsults using the database of Firmas.lv will be able to check the credit history of owners and executives of their partner companies and receive information about their unsettled obligations.

Paus Konsults and GfK Baltic have carried out an opinion poll to find out the awareness of Latvians about consequences of not fulfilling credit liabilities, which has highlighted significant contradictions. According to the poll results, 70% of respondents believe that they are aware of what are the consequences of not fulfilling credit liabilities. Yet a deeper study has shown that only 6% of respondents can name all actual consequences of not fulfilling mortgage loan, car leasing and short-term loan obligations. A majority of respondents does not know that mortgage loan and car leasing liabilities are not limited by the value of collateral. The most light-minded attitude was shown towards short-term credit liabilities – residents are not aware of the fact that consequences of not fulfilling credit liabilities are similar to those of long-term loans.

The consequences of not fulfilling short-term credit liabilities is what the respondents are worst informed about. Only 15% of them have ticked all possible consequences of not fulfilling credit liabilities in given answers. 16% of respondents are fully aware of the consequences of not fulfilling mortgage loan liabilities, and 19% – about the consequences of not fulfilling car leasing liabilities. The opinion poll shows that 58% of respondents know that consequences of not fulfilling liabilities are the same for both long-term and short-term loans, but 38% believe that consequences of not fulfilling liabilities of a mortgage loan are more serious.

The most frequently mentioned consequences of not fulfilling mortgage loan liabilities are: damaged credit history (83%), alienation of the real estate (80%), as well as that the guarantor is also liable for the loan (70%). Only 60% of respondents are aware of the fact that they will have to continue repaying the loan even after the real estate is alienated. The most frequently mentioned consequences of not fulfilling car leasing liabilities are alienation of the vehicle (84%) and damaged credit history (78%). Much fewer people are informed about the fact that they will have to continue repaying the loan after the car is alienated (56%) and the guarantor is also liable for the loan (56%). Only one of every four respondents knows that his/her real estate may be alienated unless he/she pays the car leasing.

As for the consequences of not fulfilling short-term credit liabilities, a majority of respondents (80%) mention damaged credit history. Much fewer people are aware of the fact that for not fulfilling their credit liabilities they can lose their real estate     (only 19%), movable property (27%) or their guarantor may be asked to repay the loan (44%). Moreover, 10% were unable to answer the question about not fulfilling short-term liabilities.

Paus Konsults has a won a tender for the right to recover debts from debtors of AS Latvenergo. Co-operation with one of Latvia’s biggest companies is evidence to more than 10 years of successful and professional operations of Paus Konsults in the field of debt collection.