13 October 2017
Late in 2016, the Consumer Ombudsman applied to the Market Court for an injunction on the payday loan company 4finance on the grounds of unreasonable and unlawful credit conditions and unlawful credit granting practice in four separate demands for injunction. The Market Court imposed three injunctions on 4finance on 13 October 2017. Correcting the significant faults in the payday loan sector also requires a change in legislation, and in fact, the Consumer Ombudsman considers it necessary to extend the interest rate ceiling provision without delay to apply to all consumer credit.
4finance markets and grants EUR 2010 one-time credit with a repayment period of 30 days via their website Vivus.fi.
The application submitted to the Market Court by the Consumer Ombudsman on 24 November 2016 included four demands for injunction. The Consumer Ombudsman demanded that 4finance Oy be prohibited, in its consumer credit operations, from:
- Using a practice where information about the credit and the credit provider pursuant to the Consumer Protection Act is not delivered to the consumer in a permanent format, well in advance of entering into the credit agreement. The purpose of the advance information is to ensure that the consumer considers taking on the credit and that he or she receives the information about the credit and the credit provider set by law. Delivering this information to the consumer only when entering into the agreement or after it is in violation of the law.
For the Consumer Ombudsman’s demand 1, the Market Court prohibited 4finance Oy from renewing the procedure, in which the consumer is provided the credit conditions and the form “Vakiomuotoiset eurooppalaiset kuluttajaluottotiedot” (Standard European consumer credit information) only after the consumer has entered into the credit agreement.
- Using a practice where the interest rate is not given as an annual interest rate in marketing, when entering into a contract, or in the contract terms and conditions. It is misleading to consumers to give the interest rate of the credit in marketing and when entering into the agreement as the monthly or even the daily interest rate instead of the annual interest rate. The EU Consumer Credit Directive requires that the interest rate be given as the annual interest rate in marketing and credit agreements.
For the Consumer Ombudsman’s demand 2, the Market Court prohibited 4finance Oy from renewing the procedure, in which the credit marketing does not state the interest rate for the credit as an annual percentage of the credit amount in a context, in which figures describing costs charged for the credit or other information on the credit terms would be stated, or in the form “Vakiomuotoiset eurooppalaiset kuluttajaluottotiedot” (Standard European consumer credit information) or the terms of agreement concerning the credit, stated as an annual percentage of the credit amount.
- Using contract terms based on which the credit late-payment interest rate is unreasonably high, i.e. more than the amount permitted by the interest rate restriction of the Consumer Protection Act, which is currently 50 percentage points. The Consumer Ombudsman deems that the 182.5 percent late-payment interest rate terms used by the company are unreasonable for the consumer.
Concerning demand 3, the Market Court prohibited 4finance Oy from continuing to use a term of agreement, according to which the credit provider would have the right to charge an annual penalty interest of 182.5 per cent or more on the delayed amount for a period of 180 days from the time when the credit fell due in its entirety.
- Using contract terms based on which the consumer is charged more than the collection costs of a delayed payment pursuant to the Debt Collection Act and an interest rate corresponding to, but no more than, the interest rate cap pursuant to the Consumer Protection Act of late-payment interest rate for the corresponding period, when an extension on the repayment period is agreed on before the due date. A consumer who requests an extension to the repayment period before the due date cannot be put in a worse position compared to a consumer who does not pay the credit back.
The Market Court rejected the Consumer Ombudsman’s demand 4.
The Consumer Ombudsman requested each injunction to be reinforced with a EUR 100,000 penalty payment. In its decision on 13 October, the Market Court ordered compliance with the injunctions 1-3 under the penalty of a fine of EUR 100,000.
The Market Court case concerning 4finance is a part of the Consumer Ombudsman’s monitoring activities in order to correct the faults discovered in the activities of payday loan companies. For consumers, the greatest problem involves the large credit costs of credits of EUR 2,000 and more that are not within the scope of interest rate restrictions. The Consumer Ombudsman hopes that the issue could be resolved quickly by changing the legislation so that the interest rate cap regulations would be extended to apply to all consumer credit. The Consumer Ombudsman has submitted a legislative proposal on the issue, and the Ministry of Justice has drawn up a review memorandum on the matter in the spring of 2017.