Pawnbrokers consider themselves alternative to controversial instant loans

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Pawnbroking services are gaining popularity in Finland.
      The image of the industry portrayed by the Finnish cinema in the 1940s and 50s, with a suspicious-looking pawnshop keeper giving the protagonist a couple of tenners for a precious heirloom clock purely out of charity, is a far cry from the bank-like appearance of today’s pawnbrokers.
      Although there was no congestion on the opening day in the new Leppävaara branch of the pawnbroking market leader Helsingin Pantti, the company’s loan stock grew last year by a fifth from the year before, reaching around EUR 15 million in total. The firm’s net sales in the form of interest and fee income reached about EUR eight million.
     
According to Helsingin Pantti managing director Matti Huotelin, who has worked in the branch for 15 years, the growth figures together with the emergence of new players such as Arvopantti and Hakaniemen Pantti speak of the increased demand for quick loans.
      In Huotelin’s view pawnshop loans are just another part of the consumer credit spectrum, one that is not much affected by the fluctuations of the economy.
      Huotelin is eager to discuss the future of the pawnbroking industry.
      A licencing practice governs the field and the principles of operation have become regularised during the 128 years that there has been pawnbroking in Finland.
     
In Huotelin’s opinion, pawnshop loans can be regarded as a safe and flexible alternative to instant loans.
      The identity of the lender is always verified and there is no danger of indebtedness, for if the borrower is unable to pay back the loan the unredeemed item is sold at auction.
      “But even this will not affect the customer’s credit history”, Huotelin emphasises.
      In Helsingin Pantti, the average sum lent is 350 euros.
      Only just over five per cent of the pledges remain unredeemed. This is because jewellery in particular has a lot of sentimental value to the pawnee.
      In the display cabinets of the pawnshop, there is also so-called vintage jewellery for sale. These items were acquired from public auctions by the pawn shop’s business partner.
     
Restrictions have been put in place in an attempt to set limits to the operations of companies offering instant loans.
      This is because instant loans have caused considerable problems to certain borrowers.
      A new restriction will come into force at the beginning of December. According to this tightening of the law, all companies offering instant loans have to become registered and have to adhere to standards of good lending practice.
      Previously the companies have already been ordered to positively identify the person requesting a loan and to inform the client of the actual annual rate of interest.
      Furthermore, instant loans cannot be granted between 23:00 and 7:00 - an attempt to weed out those who borrow money while the balance of their mind is temporarily impaired by a long evening in the bar.
     
Not everyone adheres to the regulations, however. In a snap inspection arranged last spring, 13 of the 80 inspected companies failed to announce the actual annual interest accurately.
      The annual interest for an instant loan is sky high. In a period of twelve months an instant loan worth EUR 50 can accrue interest of more than 3,000 per cent. According to the calculator on the Helsingin Pantti website, the actual annual interest for a one-month EUR 50 pawn loan is 54.5 per cent.
      The consumer authorities have not been complained to about pawnbrokers' activities, but for example the Consumer Disputes Board receives a few dozen complaints against instant loan companies each year.


Previously in HS International Edition:
  Parliament divided over law on instant loans (14.10.2009)

Links:
  Helsingin Pantti

Helsingin Sanomat