5 April 2018
In March 2017, the Consumer Ombudsman took the payday loan company IPF Digital Finland to the Market Court and applied for an injunction on the company, on the grounds of unreasonable and unlawful credit conditions. The company had offered consumers the Credit24 Joustolimiitti flexible loan product. The company did not include the withdrawal fee in the credit costs when calculating the actual annual interest rate, giving consumers an inaccurate picture of the costs of the credit, which also distorted comparability between different types of consumer loans.
According to the Consumer Protection Act, when providing consumer credit, both marketing and the credit agreement must indicate the actual annual interest rate, taking account of all credit costs.
IPF Digital Finland Oy did not take the highest withdrawal fee rate into account as a credit cost. When the highest withdrawal fee rate is taken into account in calculating the actual annual interests rate, the costs charged on Credit24 Joustolimiitti loans are in breach of the Consumer Protection Act, since they are loans of EUR 2,000, or less.
IPF Digital Finland Oy justified its approach on the grounds that, in the case of flexible credit products like Credit24 Joustolimiiti, whereby the consumer can make several withdrawals without a separate credit decision within the granted credit limit, no withdrawal fee was charged for the first withdrawal, but only for subsequent withdrawals. Due to this discount on the first withdrawal, the company did not account for the withdrawal fee in the actual annual interest rate.
The widespread interpretation has spread around the microlending sector that the highest fee charged in conjunction with credit withdrawals does not need to be included in the actual annual interest rate. The Consumer Ombudsman therefore considered it important to obtain a decision from the Market Court in the matter.
In its decision of 5 April 2018, in accordance with the request of the Consumer Ombudsman the Market Court placed an injunction on IPF Digital Finland Oy with regard to continuing or renewing a procedure whereby it:
- Omits the highest rate, as a credit cost, pursuant to the terms and conditions charged on credit withdrawal when calculating the actual interest rate in the marketing of consumer credit and when entering into a credit agreement or
- provides consumers with non-goods-based credit with a credit limit or size of less than EUR 2,000, in such a manner that the actual annual interest rate of credit agreements, including the highest price for withdrawing credit, exceeds the maximum amount referred to in Section 7 of the Consumer Protection Act.
The injunctions are valid with immediate effect and the company must comply with them under the penalty of a EUR 100,000 fine.
Consumer Ombudsman took payday loan provider IPF Digital Finland to Market Court. Finnish Competititon and Consumer Authority ‘s Press Release 22 March 2017.