Amendments to legislation governing housing loans and consumer credit took effect on 1 January 2017. The new provisions apply to consumer credit agreements made after the provisions have entered into force.
According to the amended provision of the Consumer Protection Act, loan interest can only be changed in response to changes to a reference rate identified in the agreement and provided that such changes have been agreed upon in the credit agreement. Creditors do not have the right to change the interest unilaterally on any other grounds while the loan agreement is in force. It is a particularly common practice in housing loan agreements to tie the credit rate to a reference rate agreed to in the credit agreement, such as euribor.
In practice, this means that interest rate floors are not permitted. An interest rate floor refers to a condition in the loan agreement stipulating that the lowering of the interest rate will not be taken into account after a certain limit is reached. Following amendments to the legislation on housing loans, the creditor also has the right to charge the consumer for a credit margin when the reference interest is negative, if this has been agreed in the credit agreement.
Agreement conditions establishing interest rate caps are permitted, as a cap only prevents the interest rate from increasing. In other words, it always benefits the consumer. On the other hand, interest rate collars are only permitted if both the floor and the cap are objectively fair.
Reforms to the legislation governing housing loans, Finnish Consumer Ombudsman´s Newsletter 6/2016