16 September 2020
In recent years, the Consumer Ombudsman has examined the comparison and tendering services of credits as part of its credit supervision. Based on the observations, there are shortcomings in the marketing of credit comparison services, for the rectifying of which the Consumer Ombudsman has sent a letter of guidelines to the service providers. In its guidelines, the Consumer Ombudsman also reminded the service providers of a ban on direct marketing of credits which will be in force until the end of this year.
The credit market offers various credit comparison and tendering services through which consumers can apply for credit and receive credit offers from several different lenders. Based on observations made by the Consumer Ombudsman, the websites of the service providers contain misleading and unclear information.
In its letter of guidelines, the Consumer Ombudsman reminded the comparison and tendering services that they must comply with certain consumer credit provisions of the Consumer Protection Act. Such provisions include good lending practices and the obligation to provide information when advertising credit.
Comparisons have been advertised with unjustified claims of coverage and affordability
Based on the observations made by the Consumer Ombudsman, credit comparison websites often attempt to create an impression that comparisons and competitive tendering made on behalf of the consumer are more comprehensive than they actually are. Typically, the comparisons have only covered credits offered by the partners of the service providers.
“If the service provider fails to clearly describe the partners, the consumer may obtain a misleading perception of the coverage of the comparison and the impartiality of the service. From the viewpoint of consumers, it is important that in the marketing of a service, information about partners and the role of the service are made transparent, “says Consumer Ombudsman Katri Väänänen.
Moreover, in the marketing of services, service providers may have argued, without supporting evidence, that the credit provided through them is always cheaper or that the consumer receives tangible savings by combining their existing loans through the service provide. In its guidelines, the Consumer Ombudsman emphasised the fact that making such claims is not justified in a situation where the service provider only compares the credits of its partners.
Attention must be paid to the way in which credit information is presented
In addition, consumers were not always given all the information required by the Consumer Protection Act in connection with the presentation of credit offers. According to the law, the consumer must be informed about the following:
- actual annual interest on a credit
- interest on the credit and other credit costs
- amount of the credit or the credit limit
- contract duration
- total amount of the credit costs and
- number of payment instalments.
From the consumer's point of view, the key information also includes the type of credit that is marketed, i.e., whether it is a one-time credit or a continuous credit.
In its guidelines, the Consumer Ombudsman noted that when providing information on the credit, attention should be paid to the manner in which credit is presented. Information shall always be provided in a clear and concise manner. For example, it must not be scattered throughout websites; rather, the consumer must be able to easily see all information at a glance.
The prohibition on direct marketing also applies to credit comparison services
In its guidelines, the Consumer Ombudsman also reminded the credit comparison services of the temporary ban imposed on direct marketing of credits. In July, the Consumer Protection Act was temporarily amended so that the interest rate on certain consumer loans was temporarily limited to 10 per cent and, at the same time, the direct marketing of credits was prohibited. Direct marketing of credit comparison and tendering services is also prohibited.
“Direct marketing is prohibited to both new, existing and previous customers until the end of the year. From the perspective of the prohibition, it is irrelevant whether credits are marketed by, for example, a creditor, credit intermediary or other party, “says the Consumer Ombudsman.
It should be noted that even if the temporary interest rate ceiling does not apply to commodity-linked loans, such as hire-purchase transactions or credit card loans, the prohibition on direct marketing also applies to such loans.