Market Court: Bondora’s interest terms violated price regulation on lending – Consumer Ombudsman seeks to appeal on the pricing of other credit costs

The Market Court has banned the credit company Bondora from continuing or renewing its procedure concerning the interest terms of credits on pain of a fine of €100,000. However, contrary to the Consumer Ombudsman’s demands, the Market Court did not consider Bondora’s credit pricing to be in violation of the Consumer Protection Act in other respects. In January 2023, the Consumer Ombudsman took the company to the Market Court for violating credit price regulations. 

From September 2019 to November 2021, Bondora concluded agreements including costs it designated as credit interests by charging the costs throughout the credit relationship for the original amount of the credit and not for the remaining principal value. The Market Court found that, due to the procedure of the credit company, the interest rates on credits taken out by consumers have exceeded the maximum interest rate referred to in the Consumer Protection Act.

When the interest rate ceiling is exceeded, consumers who have concluded such a credit agreement are not obliged to pay any credit costs. This also applies retroactively: if a consumer has already paid credit costs, these payments must be deducted from the principal of the credit and the consumer is entitled to a refund of their payments exceeding the principal of the credit.

”We expect Bondora to act on its own initiative to refund consumers as dictated by the Market Court decision.”

Consumer Ombudsman Katri Väänänen

According to the Consumer Ombudsman’s observations, Bondora collects outstanding credit payments through the European order for payment procedure. In Finland, all European orders for payment are processed in a centralised manner in the District Court of Helsinki. If a consumer receives a payment order from Bondora and the claim is based on a credit containing the above-mentioned interest clause, the consumer may lodge a statement of opposition within 30 days. Read more about the European order for payment procedure and the process.

Ambiguities persist in credit price regulation

Bondora has also provided consumers with three separate services designated as ancillary services, the prices 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 finds that the costs of the services in question in fact constitute other credit costs, which should be acknowledged when calculating the maximum amount of the credit costs.

Contrary to the view of the Consumer Ombudsman, the Market Court found that these costs are not credit costs and, therefore, they do not need to be considered as part of the maximum credit costs. The Market Court found that since the terms of the services designated as Bondora’s ancillary services were not part of the terms of the credit agreement, the costs do not constitute credit costs as referred to in the Consumer Protection Act. The Consumer Ombudsman has decided to apply for a leave to appeal the matter to the Supreme Court.

”We believe that the decision of the Market Court would allow lenders to circumvent price regulation by excluding costs from the statutory maximum amounts through various contractual means. We find the Market Court’s decision disappointing in this respect and, therefore, we will be appealing the matter to the Supreme Court.”

Consumer OmbudsmanKatri Väänänen

Luottojen There have been plenty of problems in complying with credit cost regulation, and the Consumer Ombudsman has investigated them with several finance companies. In December 2022, the Market Court issued its decision in a case concerning Blue Finance Finland Oy, in which the Market Court found that fees related to obtaining credit should be counted as credit costs. The case is currently pending before the Supreme Court. In spring 2023, the credit company Santander undertook to correct its operations as required by the Consumer Ombudsman due to a violation of price regulations.

Price regulation sets the maximum level for credit costs

According to the credit cost regulation, which took effect in September 2019, the annual interest charged on the unpaid principal of a credit must not exceed 20 per cent. Starting in October 2023, the interest rate ceiling on credits will drop to 15 per cent, plus a reference rate in accordance with section 12 of the Interest Act. Even then, the interest rate of a contract must never 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 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 paper invoices constitute credit costs, regardless of the amount of time and the method used to accomplish the action. Only fees charged for fully optional ancillary services are excluded from the credit costs. In such a situation, the credit must be offered under the same conditions, regardless of whether or not the consumer signs an agreement for an ancillary service in connection with the credit agreement.

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Consumer Ombudsman takes finance company Bondora before Market Court for violations of price controls on lending