Enforcement campaign reveals shortcomings in marketing of consumer credit

Regional administrative authorities and the Finnish Consumer Ombudsman have implemented a joint campaign to monitor compliance with rules on the marketing of consumer credit for household appliances and furniture. In the campaign newspaper and magazine advertisements, as well as direct marketing material delivered to homes were examined. There were shortcomings in the marketing of consumer credit in the disclosure of the real annual interest rates, for instance.

The campaign took place from the beginning of November 2012, to the end of January 2013. A total of 1,008 advertisements were evaluated, and investigations took place in 78 communities in Finland. Regional administrative authorities issued a total of 287 cautions as a result of the scrutiny.

Regional administrative authorities took issue with consumer credit marketing which did not meet the requirements on the information that must be disclosed in the advertising of loans, as stipulated in rules put forward in chapter 7 of the Consumer Protection Act. The purpose of the campaign was to increase awareness that these rules exist, and that they must be followed.

Another goal is to guide the consumer to pay attention to the important information pertaining to repayment. The rules also oblige the lender to disclose more in its marketing than just the real annual interest. On the other hand, individual credit terms, such as the payment time, must not be emphasised in relation to other information.

Shortcomings observed in advertising consumer credit

The following shortcomings were found on the basis of the results of the investigation by the regional administrative authorities:

The real annual interest rate or the running interest rate of the credit was missing from the advertisements;

  • Consumer credit was generally advertised as interest-free, or that the interest rate was zero per cent, even though the real annual interest was not 0%;
  • The name of the lender was missing from several advertisements;
  • Different designations were used for various forms of credit in a confusing manner in sample calculations of the real annual interest: “account credit”, “card credit”, or “credit valid indefinitely”.

Companies took mostly a positive view of the observations of the authorities urging them to rectify the inadequate marketing. The Consumer Ombudsman has also reminded all of the finance companies mentioned in advertisements that were investigated in the campaign about the requirements of the law and of the obligations of the financier in the marketing of consumer credit.

Law changes on June 1 – Consumer Ombudsman updates credit policy line to companies

New rules on consumer credits take effect in Finland on June 1, 2013. Price regulation of small loans is proposed as the primary means for reducing the debt problems caused by instant loans.

The new interest ceiling rule is especially important: If the principal of the loan or the credit limit is less than EUR 2,000, the real annual interest rate must not exceed the reference rate plus 50 percentage points. This also applies to credits that are linked with goods, which also include the right to withdraw money.

Pursuant to the legislative change, the Finnish Consumer Ombudsman will update the guidelines (in Finnish and Swedish) to companies for credit policy to correspond to the new rules that are taking effect. Likewise, the content of the web pages aimed at consumers concerning consumer credits will be updated to reflect the new rules.

The Consumer Ombudsman will also monitor compliance with the regulations that take effect on June 1, 2013 with an enforcement campaign to be implemented later in the year in cooperation with the Regional State Administrative Agency.