The finance company Bondora has offered consumers loans at unlawfully high costs by not including fees that it has levied for separate services they call ancillary services among credit costs that are subject to price regulation. Bondora has also charged consumers a cost they call credit interest in violation of the Consumer Protection Act. The Consumer Ombudsman is now demanding that the Market Court of Finland orders Bondora to cease and not repeat the procedure on pain of a fine of €150,000.
Bondora has offered consumers with three separate services they call ancillary services, the fees of which it has not included in the credit costs. The services allow the consumer to make changes to the payment schedule, repay credit early, receive priority customer service and receive messages concerning the management of the credit.
The Consumer Ombudsman deems that these are costs arising directly from the credit relationship and therefore they should also be included in credit costs, the maximum amount of which is set in legislation. Bondora’s pricing model exceeds the legislative credit cost cap. Bondora has deemed that these are ancillary services not subject to price regulation.
Until November 2021, Bondora has also agreed on the cost it has called credit interest so that the cost has been charged for the entire duration of the credit relationship for the original amount of the credit and not for the remaining principal. In the Consumer Ombudsman’s view, such a cost does not constitute credit interest as referred to in the law, but a cost similar to other credit costs. By this procedure, too, Bondora has violated price regulation.
Negotiations with Bondora have not resulted in an agreement, which is why the Consumer Ombudsman is seeking a decision by the Market Court.
Hintasääntelyn kiertämiselle toivotaan loppua
The Consumer Ombudsman has previously investigated uncertainties concerning credit costs with the finance company Blue Finance Suomi Oy. In December, the Market Court issued its decision in which it deemed that fees related to obtaining credit should be counted as credit costs. Blue Finance Suomi had excluded fees related to obtaining credit from credit costs, which is why the pricing exceeded the maximum amount for credit costs set in legislation.
However, Bondora’s case concerns different types of fees than in the case of Blue Finance Suomi Oy.
“We have already seen a wide range of pricing models with which finance companies clearly try to circumvent the legislative credit cost cap. We hope that the Market Court will provide more clarity on the lawful pricing of loans so that the practices in the sector can be improved.”
Price regulation sets maximum level for credit costs
According to the credit cost regulation, which took effect in September 2019, annual interest charged on the unpaid principal of a credit must not exceed 20 per cent. In addition, the daily amount of other credit costs must not exceed 0.01 per cent of the principal of the original credit or credit limit. Also, the yearly amount of the said other credit costs must never exceed €150.
All costs that are known to the lender and that stem from the credit relationship are included in the credit costs. For example, fees for applying for credit or making a drawdown as well as charges for sending payment details to the consumer are credit costs regardless of the amount of time and the method used to accomplish the action. Only completely voluntary additional services may be excluded from the credit costs. In such a situation, the credit must be offered under the same conditions, regardless of whether the consumer enters into an agreement for an ancillary service in connection with the credit agreement.