NEO Finance: Important information on the loan recovery process
Dear investors,
We would like to draw your attention to amendments to the Code of Civil Procedure of Lithuania and other legal acts, which entered into force on 1 July 2024 and are aimed at ensuring greater protection for debtors. Bailiffs will deduct a smaller share from the salaries of people with debts, which means that more income will be left for living expenses, while at the same time people will be encouraged to work legally and gradually get rid of the debt burden altogether.
As a result of these changes:
- The proportion of debt deducted from the minimum wage is reduced to 10%, regardless of how much debt a person has.
- Income above one minimum wage but below two minimum wages (i.e. between €924 and €1,848) will have 30% of income deducted to cover the debt.
- For income above two minimum wages (more than EUR 1 848), 50% will be deducted as before.
These legislative changes are aimed at encouraging people to return to the labour market, to get a legal job and to pay their debts consistently. According to the Lithuanian Ministry of Social Security and Labour, the previous levels of wage deductions did not reflect the financial capacity of debtors to repay their debts in the long term, which led to a tendency to conceal their income and work illegally. As a result, almost 7 out of 10 unemployed debtors were unable to repay their debts. Although the enforcement of court decisions through bailiffs may take longer for a particular debtor, these changes imply a likelihood for NEO Finance (Paskolų klubas) investors that the overall debt burden will decrease.
Another incentive for legal work will come into force from December this year: unemployed people with debts who have been out of work for six months and who are registered with the Employment Service will be able to take advantage of the possibility to suspend debt collection for six months once they are employed from 1 December 2024 - no deductions will be made from the person's wages.
It's is also important to mention that the new Consumer Credit Directive will be transposed into national law on 20 November 2025, which will provide for additional mandatory procedures to preserve the contractual relationship between the creditor and the debtor before the termination of the contract is initiated. This will include extending the credit agreement, deferring payments, reducing the interest rate, repaying in instalments or refinancing.
How will these changes affect your investments?
In line with the changes in legislation, we will put even more emphasis on pre-judicial recovery actions to help borrowers meet their obligations without going to court. This practice will also benefit the debtor by avoiding additional legal costs and fees paid to bailiffs. Investors, for their part, will see terminations in their accounts less frequently than they are used to.
The amounts currently received from debtors that have been transferred to bailiffs and distributed to investors may decrease in the current period. However, we expect that the reduction of the amount recovered by bailiffs from the minimum wage to two to three times the minimum wage will encourage people to return to the labour market and gradually repay their debts.
Our aim is to ensure that the recovery process is as efficient as possible and that the best solutions are found to settle debts from the perspective of both investors and debtors.
Why is this important to you?
We want to protect your investments and have an optimal debt recovery process. We want debtors to meet their obligations in the shortest possible time. NEO Finance is in the same boat as investors - we only earn our commission when the borrower pays the instalment. We never get our cut before you do, so we have a vested interest in efficient recovery results.
If you have any questions or would like more information about the recovery process, please contact us.