The actual annual interest rate of express consumer credit granted by Vipster Oy, a provider of small consumer credits, has exceeded 50.5 per cent, the limit allowed by the law.
Vipster Oy has granted small consumer credit up to the sum of 1,000 euros on its www.vippi24.fi, website with a nominal interest rate of 50 per cent. As of 1 June 2013, legislation has stipulated that the maximum permitted actual interest rate on consumer credits for sums below 2,000 euros has been 50.5 per cent.
In order to be granted credit by Vipster, a consumer must have a personal guarantor for the sum or acquire a guarantee from Vipster’s partner First Guarantee OU, which costs 16-36 per cent of the credit’s total sum. Together with a paid-for guarantee, the actual annual interest on a Vipster loan exceeds the 50.5 per cent maximum limit allowed by the law.
Finland’s Consumer Ombudsman believes that a paid-for guarantee is a necessary cost for those consumers, who do not have a personal guarantor for their credit. For this reason, this cost must be included in the actual annual interest rate.
The Consumer Ombudsman is now requesting that the Market Court ban Vipster from granting consumer credit that has an actual annual interest rate exceeding the maximum permitted by law. It is important to set a precedent for the calculation of actual annual interest rates, as other creditors providing small consumer credits have adopted additional costs, similar to those imposed by Vipster in an attempt to avoid interest regulations.
More information needed on restrictions concerning access to agreed-upon credit
The Consumer Ombudsman has also set its sights on restrictions concerning withdrawal of and access to credit. As regulation of maximum interest rates only applies to consumer credit under 2,000 euros, creditors providing small consumer credit are now offering consumers extended credit for the sum of 2,000 euros or more. A key characteristic of extended credit is that the consumer has the credit in his/her use in its entirety, without the creditor having authority to limit use of the credit or access to it.
If a creditor is able to baselessly limit the consumer’s ability to access the entire 2,000 euro credit at one time, the credit is not considered extended, but rather a one-time credit of less than 2,000 euros, which interest regulations apply to.
The Consumer Ombudsman has requested additional information from several companies on possible restrictions on access to credit funds. The companies have denied the use of access restrictions or claimed that they only give consumers recommendations on the withdrawal of credit. Some of the companies have claimed that the actual annual interest rate for all the under 2,000 euro credit they have granted is within the limits set by legislation or that the creditor has set time restrictions on access to credit in order to ensure the solvency of the customer.
In order to get a better understanding of the matter, the Consumer Ombudsman has requested that consumers provide itemised information on credit they have been granted, if the credit has been marketed as being 2,000 euros or more, or the actual annual interest rate together with all the costs included in acquiring the credit has exceeded the 50.5% permitted by the law.