Instant loans make debt problems worse

A report released by FCCA indicates that instant loans are common among consumers who seek help for their debt problems. People with gambling problems also tend to finance their betting with instant loans. Amounts of debt have increased and maturities have lengthened.

FCCA’S report seeks to shed light on the scope and nature of problems associated with instant loans. Using the data that the Guarantee Foundation and Peliklinikka (“Gambling Clinic”) had gathered on their customers, the researchers addressed the prevalence of instant loans among those who had sought help for their debt and gambling problems. In addition to customer registers, the researchers also went through calls and messages on instant loans received by consumer authorities, and interviewed experts who, in the course of their work, meet people with debt problems.

On the population level, no precise figures are available on instant loans that would indicate how many people have taken out instant loans and how many of such people have descended into problems with debt. Furthermore, no information is available on the proportion of people with problems who seek help.

The scope of instant-loan problems cannot be determined on the basis of a bad credit record

Among those who have sought help for their problems with debt or gambling, instant loans were very common. Over the past few years, the amount of debt of those who have taken out instant loans has increased and the maturities of loans have lengthened. At the same time, the practice of taking out new instant loans to service old debt appears to have become more common. The ample supply of instant loans, their forceful marketing and easy availability has made this possible.  Expensive “restructuring loans” have even been marketed as a solution to a debt spiral. When debts are chained to the next one, problems tend to become prolonged and to worsen.

The number of debtors who attempt to avoid a bad credit record by taking out new instant loans remains unknown. In other words, bad credit records due to instant loans tell only a part of the real scope of the problem.

A close connection exists between instant loans and problems with betting games

Most of those who have sought help for their compulsive gambling have financed their gambling with instant loans. According to those who help compulsive gamblers, the easy availability of instant loans has made the problem worse. It follows from the nature of gambling addiction that the gambler hopes that a big win “just one game away” will make up for the ever-mounting losses. The easy and quick availability of instant loans is at the core of the vulnerability of people with betting game problems, significantly exacerbating the economic plight of many people.

The new interest rate cap, introduced in 2013, produced some surprising and undesirable consequences

The 2013 interest rate cap proved a period of change in the consumer credit market. Instead of small instant loans, lenders began to offer lager loans denominated in euros, amounting to a minimum of EUR 2,000, owing to such loans not falling within regulation. The total indebtedness of customers increased and maturities lengthened. As the evaluation of creditworthiness did not work as expected, regulation has unexpected and undesirable consequences. Neither will the Interest rate cap which entered into force at the beginning of September 2019 solve any problems caused by instant loans as such, as it is only applied to instant loans the agreements of which are agreed on 1 September 2019 and later.

FCCA will continue to look into problems associated with instant loans

The report released by FCCA also provides guidelines for further research. The marketing of instant loans and direct marketing targeted at people with debt and gambling problems in particular have played a role in the emergence of debt problems and in making them worse. FCCA will tackle the marketing of instant loans and the options available to its regulation in a report to be published later in the autumn.

Raportti: Pikavippiongelmien laatu ja laajuus (Report: The nature and scope of instant loan problems) (in Finnish)

Further information: Head of Research Anu Raijas, tel. +358 (0)29 505 3650,