4 July 2011
According to the financial and debt counsellors responding to a survey conducted by the Finnish Consumer Agency, intensive marketing of loans has led to higher indebtedness among Finnish consumers. Furthermore, Finnish lenders do not make a thorough check on the credit applicants’ financial situation even though they have a duty to do this under law.
The Finnish Consumer Agency has carried out a survey among financial and debt counsellors asking them to give their views on the reasons why their customers have accumulated large debts. A total of 72 financial and debt counsellors responded to the survey, which is slightly more than half of the total number. A similar survey was also conducted in 2007, 2008, 2009 and 2010.
Nearly 70 per cent of all financial and debt counsellors believed that extensive and highly visible marketing of loans is a major reason for indebtedness among their customers. The situation is made worse by the fact that lenders grant loans without first checking their customers’ financial situation.
This is in violation of the legislation on consumer credits introduced in Finland in December 2010. Under these new legal provisions, consumers may not be encouraged to borrow money without consideration. Furthermore, lenders must always assess the consumers’ creditworthiness before granting the loan. The manner in which the creditworthiness should be assessed depends on the size of the credit and other circumstances. Even though an application for an instant loan of 20 euros might only require the checking of the applicant's payment record, loans amounting to hundreds of euros should also involve the examination of such matters as the applicant's employment situation and pay details.
A lender must be able to ask the customer the right questions. For example, some of the mail order firms offering credit already ask the customers to give details of their employment situation and to provide their pay and tax certificates regardless of the size of the loan.
Under Finnish legislation on consumer credits, lenders must also provide customers with payment difficulties with advice and support their efforts to seek debt restructuring. According to the financial and debt counsellors, this is not always the case. Only half of the financial and debt counsellors believe that lenders contact their customers so that they could agree on debt restructuring. Consumers are more active in sorting out their problems. According to the financial and debt counsellors, about 80 per cent of their customers with payment difficulties contact creditors in order to get more time for paying their invoices.
The respondents differ in their views on how many of the financial and debt counselling's customers have accumulated debts because of instant credit. They all agree, however, that instant credit has resulted in more indebtedness among young people than among older customers.
Results of the survey among financial and debt counsellors (in Finnish)