Making every effort to reduce the cost of instant credit

We have been worried about the unreasonable interest rates on instant loans for many years. A long overdue reform entered into force on 1 September 2019 when an interest rate cap was introduced. Under the new provisions, the interest rate on a loan may not exceed 20%.

However, this did not bring any relief to the tens of thousands of people that had concluded continuous credit agreements before the entry into force of the new act. If you make additional withdrawals of these loans, the actual annual interest rate is often well over 100%. In our opinion, the new interest rate cap should also apply to these withdrawals. Moreover, instant credit companies have ignored the decision of the Finnish Consumer Disputes Board that is based on a precedent issued by the Finnish Supreme Court and under which the interest rates on existing loans should not be more than 50%.

We decided to use all possible means to help those consumers who are unable to demand more reasonable credit costs. In October, we launched preliminary opt-in for a class action that concerns credit plans provided by J.W.-Yhtiöt Oy and Euro24 Finance Oy. The actual interest rate for both credit plans is over 300%. For consumers that are unable to participate in the class action, we will also provide assistance in court proceedings to the extent possible.

About 1,300 consumers have now preliminarily opted in for the class action and we have also received more than 200 requests for assistance from consumers whose debt cases are already being considered by courts. This is a good start! Next, we will hear the companies themselves. If they are prepared to cancel all credit costs so that the consumers would only have to pay the borrowed capital, there may not be any need for a class action. If no agreement is reached, we will file a class action in the Helsinki District Court.

We have spent a large proportion of our resources on preparing this class action but it is important to focus properly on such an important matter. We also have goals beyond this process. Any court decision would probably also guide other companies. Our aim is also to encourage consumers to pursue their rights more actively. For help, visit the Facts & Advice page on our website.

In addition to preparing for the class action, we also expect the police to proceed with our request for usury investigations.

Furthermore, we have started to supervise compliance with the new provisions on the interest rate cap. Unfortunately, the first months have not been particularly promising. We have already sent letters to companies drawing attention to violations of the new legislation.

Wake up instant credit companies! We urge you to show responsibility in business operations without being prompted to do so.

The text was originally published in Finnish in the Consumer Ombudsman’s blog