96 JURIDICA INTERNATIONAL 22/2014
Licentiate of Laws
Doctoral Candidate, University of Lapland
Instant Loans: Problems
and Regulations in Finland
1.1. The market situation and problems in Finland
Instant loans have been a hot topic among citizens, authorities, businesses, media, politicians, research-
ers, and the legislature in recent years in Finland—i.e., since the ﬁ rst instant loans were granted via SMS,
in 2005.*1 The instant loan was an unprecedented ﬁ nancing product; it opened the credit market to people
previously excluded from it, and the general interest in the instant-loan business led to new companies.
Accordingly, the expansion of the instant-loan business was very rapid.
Instant loans have faced general disapproval: they have been seen as a ﬁ nancial abuse of weak consum-
ers, often using aggressive and tempting marketing. According to several research reports and statistics, it
is unquestionable that instant loans have caused severe over-indebtedness problems for many consumers.
On the other hand, instant loans can be described as a solution for consumers suffering from short-time
shortage of money without invoking of credit cards or other consumer credit of larger amounts.*2
There is no ofﬁ cial or legal deﬁ nition for an instant loan. Usually it is understood as lump-sum con-
sumer credit amounting to a few hundred euros that should be paid back in two weeks to three months.
Since the loan amount is low and the repayment period is very short, the actual annual percentage rate of
credit costs is very high.*3 In Finland, instant-loan operations are conducted by businesses other than banks
and credit institutions.
In general, consumer loans are very common in Finland—along with other Western countries. Plentiful
consumer loan-taking has become an everyday phenomenon and is socially accepted.*4 One development of
the last decade can be described as a shift from a savings society toward a credit society.*5 This is a very
1 There is no precise information about when the instant-loan market was established, but several sources indicate that it
occurred in 2005. For instance, see V. Pönkä, E.-L. Parkkali. Pikaluottojen oikeudelliset ongelmat [‘The legal problems of
instant loans’]. – Defensor Legis 2010/5, p. 585 (in Finnish); Finnish Ministry of Justice. Report of the Instant Loan Work-
ing Group ‘Pikaluottolainsäädännön muuttaminen’ [‘The amendment of consumer-credit provisions pertaining to instant
loans’], report 17/2012, OM 17/41/2011 (in Finnish).
2 According to the opinion of Suomen Pienlainayhdistys ry (the Finnish Instant Loan Association), included in the report of
the Instant Loan Working Group (see Note 1).
3 The average APR was approximately 900% in 2011. See the report of the Instant Loan Working Group, p. 29 (see Note 1).
4 V. Muttilainen. Luottoyhteiskunta. Kotitalouksien velkaongelmat ja niiden hallinnan muodonmuutos luottojen säännöste-
lystä velkojen järjestelyyn 1980- ja 1990-luvun Suomessa [‘The Credit Society: The Indebtedness Problems of Households and
Change from Credit Rationing to Debt Arrangements in 1980s and 1990s Finland’]. Helsinki 2002 (in Finnish); K. Rantala,
H. Tarkkala. Luotosta luottoon. Velkaongelmien dynamiikka ja uudet riskiryhmät yhteiskunnan markkinalogiikan peilinä
[‘From trust to credit: The dynamics of indebtedness problems and new risk groups’]. – Yhteiskuntapolitiikka 2010/1, p. 20
5 V. Muttilainen (see Note 4).
Instant Loans: Problems and Regulations in Finland
JURIDICA INTERNATIONAL 22/2014
pertinent description in view of the fact that over 50% of Finns had some form of loan in 2013 and about a
third of Finns had consumer credit, and that these proportions have been quite stable for about a decade.*6
How ever, the average amount of consumer credit has been decreasing over the last ﬁ ve years—in spring 2013,
the average amount of consumer credit per debtor was EUR 8,100, but in 2009 the amount was EUR 9,800.*7
The most popular types of consumer credit are bank loans (16% of all consumer debtors), bank accounts with
a credit limit (17%), credit cards (5%), and hire purchase (5%).*8 Instant loans are clearly more uncommon.
Only 2.4% of all consumers who have some form of consumer credit had instant loans in spring 2013.*9
At ﬁ rst it seems that instant loans do not play a remarkable role in consumers’ total indebtedness.
However, instant loans are a cause of one third of all court decisions related to consumer debt claims (see
the chart in Section 9), heavily burdening the district courts and also enforcement authorities. In fact, this
proportion has been increasing in the last ﬁ ve years.
Easily accessible instant loans have proved to be quite a popular ﬁ nancing product, especially for those
lacking the opportunity to obtain a loan from a bank or other, similar credit company by reason of their
weak ﬁ nancial standing. According to several research reports, instant loans have been the most common
among consumers who engage in only short-term planning of their ﬁ nancial situation or who have prob-
lems with controlling their ﬁ nancial issues, along with those whose income is low or whose expenditures
have exceeded their income, especially single parents, the young, and the unemployed.*10 Furth ermore,
about 60% of instant-loan debtors have taken out more than one instant loan.*11 Several Web forum discus-
sions pertaining to instant-loan problems were analysed in 2012.*12 This research indicates that in some
cases the shame of indebtedness and the fear of getting a bad credit history may even cause panic-driven
obtaining of instant loans aimed at repayment of the previous loans. This reactive instant-loan behaviour
results in skyrocketing indebtedness stemming from the high costs of the loans, but at the same time the
over-indebted consumer may still retain a good credit history if paying back the loans on time. Instant loans
are not the only reason for consumers’ over-indebtedness problems, but they still play a considerable role:
a survey of ﬁ nancial and debt advisers (conducted in 2011) indicates that about half of the advisers consider
instant loans to be the main reason for the over-indebtedness problems of the majority of their clients.*13
1.2. Overview of the consumer-credit regulations
The Consumer Protection Act*14 (CPA) is the general law applicable in business-to-consumer relations.
The most important consumer-credit regulations can be found in its Chapter 7. In December 2010, the
whole chapter was revised in connection with the implementation of the Consumer Credit Directive, but
the chapter includes also non-harmonised, purely national provisions. The CPA’s Chapter 7 includes regu-
lation of consumer-credit contracts, consumer-credit marketing, and contractual relations to be followed
6 Federation of Finnish Financial Services. Säästäminen, luotonkäyttö ja maksutavat [‘Savings, credits, and payments’], spring
2013 (in Finnish). Available via http://www.fkl.ﬁ / (most recently accessed on 12.4.2014).
10 Ibid.; R. Kaartinen, J. Lähdemaa. Miten ja mihin nuoret käyttävät pikavippejä ja muita kulutusluottoja? [‘For What Purposes
and How Do Young People Use Instant Loans and Consumer Credit?’]. Ministry of Trade and Industry (MTI-ﬁ nanced stud-
ies) 10/2006, November 2006; E. Valkama, V. Muttilainen. Maksuvaikeudet pikaluottomarkkinoilla [‘Payment Difﬁ culties
Associated with SMS Loans’]. Helsinki: National Research Institute of Legal Policy (Research Communications No. 86) 2008,
pp. 46–49 (in Finnish). See also A. Peltonen, Department of Consumer Law. Kuluttajavelallisen aseman parantamiseen
tähdänneet toimenpiteet 1990-luvulta lähtien [‘Measures Aimed at Improving the Position of the Consumer Debtor Since the
1990s in Finland’]. Finnish Consumer Agency (Publications Series 1/2009), pp. 21–23 (in Finnish); O. Juurikkala. Essays on
Psychology and Morality in Economic Analysis of Law: Behavioral Paternalism in Consumer Credit Regulation. Joensuu,
Finland: Publications of the University of Eastern Finland (Dissertations in Social Sciences and Business Studies, No. 40)
2012, pp. 12–13.
11 Federation of Finnish Financial Services (see Note 6).
12 K. Rantala. Vippikierteen muotokuva [‘The “portrait” of instant-loan thread’]. National Research Institute of Legal Policy,
Research Brief 24/2012 (in Finnish). Available via http://www.optula.om.ﬁ / (most recently accessed on 12.4.2014).
13 Finnish Consumer Agency. Kysely talous- ja velkaneuvojille velkaantumisen taustatekijöistä 2011 [‘Survey for Financial
and Debt Advisers about the Background to Consumers’ Indebtedness’]. Available via http://www.kuluttajavirasto.ﬁ / (most
recently accessed on 12.4.2014) (in Finnish).
14 Kuluttajansuojalaki (Consumer Protection Act), 20.1.1978/38, as amended.