The Finnish government has on 23 April 2020 proposed certain amendments to the legislation on consumer loans due to the coronavirus outbreak. According to the government’s proposal, the applicable interest rate on consumer loans will be temporarily capped at 10 per cent instead of the current 20 per cent. Also, any direct marketing to consumers will be banned. These restrictions are planned to enter into force on 1 May 2020 and apply until 31 December 2020.
Interest rate cap
According to the Consumer Protection Act, the interest rate of a consumer loan may not currently exceed 20 per cent. In addition, the Act regulates the maximum amount of other credit costs.
According to the proposed interim provisions, the interest rate on consumer loans may not exceed 10 per cent, even if the agreed interest rate would have been higher. However, the proposed provisions would only apply to consumer loans other than so-called commodity-linked loans. Accordingly, e.g. loans under credit cards such as Visa and MasterCard are excluded from the scope of the interest rate cap. It will also be prohibited to increase any fees charged under a credit agreement.
The proposed interest rate cap rate would apply to one-off credit agreements concluded on or after 1 May 2020. I.e. it will not have a retroactive effect in this regard. However, as regards continuing credit agreements, such as credit limit products, the proposed interest rate cap would apply also to agreements entered into prior to 1 May 2020, but only insofar as the credit is used on or after 1 July 2020. Accordingly, in this regard the proposed interest rate cap would have a retroactive element, but its impact would be limited by the fact that it would only apply to drawdowns made in the future
Where the proposed interest rate cap has not been complied with, the Court should automatically dismiss any claim for excess interest.
Prohibition of direct marketing
The proposed interim provisions regarding direct marketing would impose a ban on direct marketing of consumer loans. The proposed ban would apply to any direct marketing (including electronic marketing) and apply irrespective of whether the marketing is directed to new or existing customers.
However, according to the proposal, the ban would be limited to direct marketing only, and would thus apply only to marketing targeted at a specific consumer or household. Therefore, any marketing of consumer loans e.g. by phone, e-mail or personal social media would be prohibited, whereas marketing by newspaper, radio, street or television advertisements would not.