Parliament divided over law on instant loans

Registration of loan firms demanded from government

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The Finnish Parliament seems unable to reach any kind of unanimity on the proposed law to define and limit the instant loans business.
      On Tuesday the bill returned from the Parliamentary Economic and Finance Committee back to the Plenary Session and is likely to be endorsed next week.
      The government has suggested that instant loan companies be demanded to exercise due diligence over the identity of the borrower.
      Furthermore, funds should not be transferred to the loan receiver at night, and the actual annual rate of interest should be disclosed to the borrower, if the repayment period is over 30 days in length.
      The idea is also to ensure that the instant loans’ interests are kept within reasonable limits.
     
All this is not enough for the opposition, however, which has already come up with a couple of counter-proposals.
      The opposition demands that the instant loan firms be completely shut from 11 p.m. until 7 a.m. the next morning.
      This would ensure that instant loans could not be applied for or granted overnight.
      On top of this, the opposition wants a precise definition to the “reasonable interest” of instant loans that is tied to the reference rate of interest.
      The government only proposes that when estimating the reasonableness of the interest of instant loans, it should not be compared with interest rates of loans by other credit institutions.
      Instead, focus should be on how much the borrower ends up paying back.
     
The opposition also proposes that in the same instance an article would be included in the wording of the new law that would oblige the Finnish Financial Supervisory Authority to register all instant loan companies and to monitor their activities.
      In fact, the majority of the Parliamentary Economic and Finance Committee agreed with the opposition's stand on this issue, but in the end settled for suggesting that Parliament require a government bill on the matter.
     
If anyone is curious as to why the loan companies should be "out of action" overnight, the reason is that a good many of these instant "SMS" loans are taken out by people who are out for a night out and run out of cash before their thirst is extinguished.
      The hangover in the morning is exacerbated by a loan - with a hefty rate of interest - that they may not even remember having taken out (see earlier articles).


Previously in HS International Edition:
  Stories of bad debts gone worse leave ninth-graders with much to think about (27.5.2008)
  Failures to pay instant loans increasingly often lead to litigation (28.4.2008)
  Finns continue to take short-term consumer loans (22.1.2009)
  Instant SMS loans - the tip of the iceberg of a massive debt problem (16.12.2008)

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