Loan Companies in Poland. Theory and Practice

The book offers a comprehensive analytical review of the oper- ating model of loan companies on the Polish financial market. It is published as a component of the research project Why para- formality works. The diffusion of short term loans in Poland” financed by the National Science Centre of Poland (decision number DEC-2013/11/B/HS6/01506). The project was carried out at the Institute of Applied Social Science, University of War- saw, and headed by prof. dr hab. Iwona Jakubowska-Branicka. The timing of the project coincided with a crucial period for loan Loan companies in Poland. Theory and practice companies in Poland. During the four years in which the project took place, the section of socio-economic reality that was the Loan companies in Poland. focus of our attention underwent a major transformation. When we were planning and launching the project, the legal regulations applicable to the loan companies were scant. By the time Theory and practice the project came to an end, the regulatory framework had been significantly expanded, mainly on the initiative of the very entities subject to these regulations. The project was interdisciplinary, taking place at the meeting Edited by point of sociology, law and economics. Thus, we begin the book Iwona Jakubowska-Branicka by offering an attempt at theoretical classification of the newly emerging legal and social phenomena. We then move on to a legal analysis of the changes in the regulatory framework; a review of the loan company market structure (and the changes thereof); a discussion of the media image of loan companies; and finally, a research report on the qualitative and quantitative studies we conducted, including a portrait of the clients of loan companies against a broader social background. The two closing chapters offer a discussion of “quick loans” in the context of behavioural economics and the regulatory role of the state, and contem- plate the threats to contemporary democracy arising out of the sense of social exclusion. I hope that we were successful in out attempt to identify, analyse, and describe the changes, and that we managed to give an insightful account of the legal and operational aspects of the loan company market in Poland. I also hope that reading this book proves both interesting and inspiring. Iwona Jakubowska-Branicka ISBN 978-83-61493-05-1 9 788361 493051 Introduction 1 Loan companies in Poland. Theory and practice 2 Iwona Jakubowska-Branicka, Aleksandra Herman Introduction 3 Loan companies in Poland. Theory and practice Edited by Iwona Jakubowska-Branicka 4 Iwona Jakubowska-Branicka, Aleksandra Herman Loan companies in Poland. Theory and practice Published by Institute of Applied Social Sciences University of Warsaw Nowy wiat 69, 00-046 Warszawa, Poland tel./fax +48 22 55 20 134 e-mail: [email protected] www.isns.uw.edu.pl Reviewers: Stanis³aw Kasiewicz, Bart³omiej Walczak Editor: Iwona Jakubowska-Branicka Technical and Language Editor: TexteM www.textem.pl Publication financed by the Institute of Applied Social Sciences at the University of Warsaw This publication is part of the research project DEC-2013/11/B/HS6/01506 funded by the National Science Centre of Poland Cover and Graphic Design: Piotr Wurst Illustrations: Shutterstock © Copyright by Iwona Jakubowska-Branicka & the Institute of Applied Social Sciences at the University of Warsaw, Warsaw 2018 Reprint of all or part of material by permission only Typeset and printed by: SUMUS ul. Konopacka 3/5 m 46, 03-428 Warsaw, Poland ISBN 978-83-61493-05-1 Introduction 5 Contents Iwona Jakubowska-Branicka, Aleksandra Herman Introduction . 7 Adriana Mica Is anomaly the new hybrid? Semiformal and parabanking institutions in the financial sector . 11 Adriana Mica The purification of anomalies: parabanking and nonbanking institutions in the polish financial sector . 33 Maria Bernat Analysis of legal regulations concerning the quasi-bank sector loan companies . 55 Aleksandra Herman Consumer finance in Poland: the characteristics of the market of non-bank lending . 71 Jolanta Arcimowicz Press image of quasi-banks (parabanki) and short-term loans (chwilówki) . 95 Iwona Jakubowska-Branicka Methodology . 119 Filip Cyuñczyk, Maciej Fr¹szczak, Paulina Spa³ek Operation of loan companies on the Polish financial market. Results of mystery client survey . 123 6 Iwona Jakubowska-Branicka, Aleksandra Herman Iwona Jakubowska-Branicka Loan company client profile . 139 El¿bieta M¹czyñska ElżbietaEl¿bieta Mączyńska Payday loans in the context of behavioral economics and regulatory functions of the state . 173 Iwona Jakubowska-Branicka On democracy and social exclusion . 199 About the authors . 210 Introduction 7 Introduction This book has been quite a challenge to write. It was not because we made a decision to study an economic phenomenon from a sociological point of view, but above all because during the four years of our research, the section of socio- economic reality that was the focus of our attention underwent a major transformation. In order to understand the issue at hand, we had to engage in interdisciplinary research at the meeting point of sociology, law and economics, taking into account local conditions and time periods, determined by numerous vari- ables and captured by means of various indicators. Due to the dynamics of change, more than once we had to take a step backwards to be able to move two steps forward in our efforts to truly understand and describe the complexity of the issue of non-bank loans in Poland. We started our research in a practically unregulated and extremely predatory market, where everyone could provide lending services, freely shaping their offer, and ended it in an environment limited to large incorporated companies which promoted ethical operations and a mature corporate culture. This dramatic change took place in just four years. In 2013, we discussed for the first time the social problem of debtors due to the use of the so-called quick loans (chwilówki). Our team, initially composed of a narrower group (Iwona Jakubowska-Branicka, Adriana Mica and Aleksandra Herman), had at that time a general knowledge, mainly coming from media broadcasts, publicizing dramatized case studies of indebted pensioners of modest means and large families, comparing them with images of merciless and suspi- cious businessmen, to whose antisocial endeavours, described as usurious, there was no antidote. The issue appeared wide-spread; the announcements on poster pillars and at bus stops were omnipresent at that time: up to 25 000 zlotys, no verification, just an ID. Later on, these carefully collected advertisements complemented our original research methodology for some time, eventually becoming purely archival matter as subsequent changes pressed on. At the time, our discussions revolved around the democratization of credit, the links between the political system and the power, and the limits of state 8 Iwona Jakubowska-Branicka, Aleksandra Herman interventionism. The background featured a hypothetical theoretical construct of quasi-formality, which we understood as activities imitating formality, sanctioned by law and reflected by loan companies directly from the way banks operated, which we identified with security and regulation. The research that we started soon revealed the inadequacy of our general knowledge about non-bank lending practices. First of all, however, the termi- nology had to be revised, which entailed some changes in the perception of the entire problem. While the term quasi-formality supported the sociological operationalization of a fragment of social and economic life, the prefix quasi- automatically caused a negative attitude among our respondents representing loan companies. This was due to the discrediting of the term quasi-banking (parabankowoæ), which had been popularized by the media since the early 1990s, when the free market began to develop in Poland, the naive dream of a financial career from rags to riches had been germinating in society, and the emerging business benefited from both of these circumstances, without taking into account the ethical aspect. Later stages of the development of our project were impacted by various phenomena, all of which were equally important for us. The initial anarchy somewhat calmed down after pioneering legal regulations introduced in the 1990s (which prohibited entities other than licensed banks from accepting de- posits) and by the laborious elementary education of the society. A monopolist appeared on the market, which divided and ruled for over a decade, dictating its own standards and preventing the introduction of balanced competition, but also filling a gap in social demand. Further developments were already linked to the internet and digital revolution, which since 2011 has resulted in a com- plete remodelling of the sector in structural terms (competition has emerged and fresh capital has arrived), in terms of the offer, customer base and in terms of further growth, in close connection with digital financial technologies. At the same time, the persistent lack of adequate legal regulations increased the appetite for profit maximization at the expense of the quality of life of custom- ers who suffered exploitation. The idea of self-regulation, which was surprising in this context and at that time, paradoxically arose from the largest companies desire to combat fragmented competition, and consolidation, aimed at improving the image, enabled lobbying with the legislative authorities in order to introduce

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