1. Katri Kummoinen, Ministry of Justice, Finland Legislative amendments in Finland due to instant loans - in particular about the price regulation of small credits

2. Katri Kummoinen, Ministry of Justice, Finland Background n What is meant by instant loans? – no definition in the legislation – typically small consumer credits (a few hundred Euros) with a repayment time of a couple of weeks that are offered via mobile phones or online with no sureties required. n The first instant loan companies were established in Finland in 2005. In the beginning of 2013 there were about 80 registered companies. n The number of granted instant loans has constantly increased – 1,2 million in 2010 – 1,4 million in 2011 – 1,5 million in 2012. n The average credit amount has increased gradually from little above € 200 to nearly € 300 and the average credit time from 30 days to nearly 40 days.

3. Katri Kummoinen, Ministry of Justice, Finland Problems related to instant loans n Difficult to get precise information of the scale of the problems, because instant loans are not treated in statistics as a group of their own. It was necessary to draw conclusions on the bases of information gathered from different sources: - number of judgements in debt collection cases relating to small loans has exploded since 2005: 3000 judgements relating to debts below € 300 in 2005, when the corresponding number in 2011 was 80 000 judgements. - on the bases of information received from execution authorities, it was possible to conclude that instant loans have caused the biggest problems to young people aged under 25. - furthermore, it became clear that problems are worsened by debt collection costs and legal expenses which together can easily amount to a sum triple to the amount of the capital owed.

4. Katri Kummoinen, Ministry of Justice, Finland Reforms in three stages n The first reform package included the following measures: – the obligation to disclose the APR in the advertising of credits below € 200 (falling outside the scope of the CCD) – the obligation to verify carefully the identity of the person applying for a loan – the ban to pay out the funds immediately in cases when a loan is applied for and granted between 11 pm and 7 am – usury provisions in the Penal Code were updated. n The first reforms entered into force in February 2010.

5. Katri Kummoinen, Ministry of Justice, Finland Reforms in three stages n The second reform package included the following measures: – Registration (=licence) is required from persons offering consumer credits. In order to be registered, conditions relating to professional competence and reliability of the management must be fulfilled. – When CCD was implemented, Finland did not exclude small loans below € 200 from the scope of application of the national provisions. n The reforms included in the second package entered into force in December 2010.

6. Katri Kummoinen, Ministry of Justice, Finland Reforms in three stages n The third reform package included the following measures: – cap on the APR of small consumer credits – tightening the requirements to assess the credit worthiness of the loan applicant – ban to use text messages or other corresponding communication services that are subject to surcharge in the communication relating to credit relationships n The reforms included in the third package entered into force in June 2013.

7. Katri Kummoinen, Ministry of Justice, Finland The cap on the APR of small consumer credits n Scope of the regulation: – consumer credits below € 2000 – exemption: goods-or-services-related credits, unless the credit agreements includes an option to directly withdraw funds n The APR may not exceed 50 % + the reference rate referred to in Interest Act. Currently the maximum APR is 51%. n The definition of the APR is the same as in the CCD.

8. Katri Kummoinen, Ministry of Justice, Finland Other related reforms n lowering the maximum amounts of debt collection costs which may be charged from the debtor (March 2013) n lowering the maximum amounts of legal costs which may charged from the debtor (September 2012) n default interest rates and fees have been regulated by Interest Act already since 1980’s