Failures to pay instant loans increasingly often lead to litigation

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The payment problems associated with consumer credit loans and instant loans are increasing at a brisk pace in Finland.
      In 2007, Finnish district courts made a record number of decisions relating to cases involving debts and other claims. The number of such cases was more than 113,000, which was higher than ever before in the past 20 years and more.
     
When comparing with the previous year, the growth is as much as 48 per cent. Moreover, the figures have doubled over the past ten years.
      The information is based on figures released by Statistics Finland.
      This time, debt-related problems cannot be explained by guarantees on loans that have gone bad, bills of exchange, ordinary loans and things like that, as contrastingly the number of such incidents has declined.
     
Increasing the statistics is the category ”Other debt obligations”, including various consumer credits, bank overdrafts, mail-order debts, and instant loans with extremely high interest rates.
      This year the number of debt recovery proceedings appears to be growing even more rapidly than in 2007. For example, the number of cases that have been tried by the Helsinki District Court over the period from January through March is 15 per cent higher than that over the same period last year.
     
The same trend can be seen at debt collection agencies. For example, the number of assignments received by Intrum Justitia, the leading credit management services company in Europe, has accelerated over the past couple of years.
      The debt collection agencies usually manage to collect the majority of outstanding debts with the help of a debt settlement programme. Only the most intractable cases end up in court, whereafter they can also be seen in the statistics.
      ”The number of credit providers is higher than before, while the number of credit cards has also increased. There are simply more possibilities to get loans than before. Instant loans are the newest, increasing the volume further. Today, various credit opportunities are also being advertised”, says Regional Managing director Thomas Feodoroff from Intrum Justitia.
     
The number of recorded notices of default has also increased. According to the database of Suomen Asiakastieto Oy, the leading provider of business and credit information in the country, the number of new personal notices of default recorded in 2007 exceeded half a million.
      The number of such notices was 23 per cent higher than that in the previous year.
      A notice of default follows a district court ruling or at the latest when a debt cannot be recovered by an enforcement order.
     
In some experts’ view, the increasing number of problems relating to debt collection is a sign of an upcoming recession.
      ”It is possible that debt collection becomes more active prior to a recession period, when companies are trying to collect all the money they can before individuals with payment difficulties are driven to insolvency”, says Antero Nuotto from the Helsinki District Court.
      However, another kind of theory is proposed by Intrum Justitia.
     
”For the time being, it is still possible to collect outstanding payments. Only after debt collection has become more difficult, can one anticipate a recession. Moreover, when the unemployment rate starts rising, real financial difficulties will appear. At present, the high level of debt collection is just a sign of an economic boom, as people are spending more money and using more credit cards”, Feodoroff concludes.


Previously in HS International Edition:
  Finns in increasing numbers fall into consumer credit debt trap (19.1.2007)

Links:
  Statistics Finland
  Intrum Justitia
  Suomen Asiakastieto

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