Instant Loans: Problems and Regulations in Finland

Antti Makkonen

Abstract


The article provides an overview of instant-loan-related regulation and associated topical problems in Finland. Instant loans are a problematic loan product, and they account for a remarkable proportion of all indebtedness problems of consumers. One factor here is that instant loans are provided by credit companies outside the banking sector.

Finland has adopted responsible lending regulations, on good lending practice, a creditworthiness assessment obligation, and identity verification. Consumer lending is a business subject to licence. Also, credit costs and debt-collection costs are regulated, and usury in connection with credit is criminalised by the law. Furthermore, credit-data regulation plays a significant role in consumer lending.

The new laws seem to have solved some of the problems, but new problems have emerged. Most significantly, regulation pertaining to a maximum annual percentage rate of charge has caused some decrease in instant loans’ numbers and amounts, but, meanwhile, average repayment periods have increased and more complex loan products have emerged. Other noteworthy topical issues in this connection include the multi-layered system for supervision of consumer creditors and the lack of provisions regarding the financial reliability of consumer creditors.


Keywords


instant loans; payday loans; consumer credit; consumer protection; financial markets

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DOI: https://doi.org/10.12697/JI.2014.22.09

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Journal DOI: http://dx.doi.org/10.12697/issn1406-1082
ISSN 1406-1082 (printed matter)
ISSN 1406-5509 (online)

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