120 JURIDICA INTERNATIONAL 22/2014
Karin Sein Urmas Volens
Dr. iur., Docent of Civil Law Dr. iur., Lecturer of Civil Law
University of Tartu University of Tartu
Specialist Counsel, Sorainen Law Firm
Legal Problems and Regulations
related to Easy-access
Non-secured Consumer Loans
Easy-access non-secured consumer loans (instant loans) are a fairly new phenomenon in the Estonian
credit market. Providers of this variety of product do not have to follow any speciﬁ c regulations. Instant
loans typically have a short maturity term, the amount generally does not exceed EUR 1,000, and the loans
are provided by private enterprises not registered as credit institutions.
On account of the rapid advances of technology in recent years, instant-loan providers have been able to
make it exceptionally easy for anyone to apply for such loans. The providers are open for applications for long
hours, and often one can apply for a loan simply by sending a text message (SMS) from a previously identi-
ﬁ ed mobile phone. In contrast to operations involving a commercial bank, wherein responding to a loan
application may take up to ﬁ ve days, providers of instant loans give their answer in minutes. For example, in
the case of instant-loan provider Credit24*2, the ofﬁ ces are open from 8am to 10pm, and a potential client
who does not have access to electronic channels can simply ﬁ ll in a form in a Maxima supermarket.
The market for instant loans is continuously and rapidly growing, so there are insufﬁ cient statistics
describing the current situation. In addition, the overall debt of Estonian households is continuously grow-
ing. Households in Estonia generally do not have experience from previous recessions of how to handle debt-
servicing problems, as household debt was modest until the economic boom of 2004–2007.*3 According
to the annual survey conducted by TNS Emor, debt-servicing payments by Estonian households increased
from 2006 to 2009, when 23% of indebted households had a debt-servicing level higher than 30% of their
disposable income.*4 There are some indirect statistics also, according to which approximately three per
cent of the total population took out an SMS loan in 2008–2009. One of the debt advisers explained that in
1 This article is prepared within the framework of the project EMP205, Topical Issues of Consumer Credit in Estonia and
Norway. The authors are indebted to Heili Püümann, stud. iur., without whom the publication of this article would not have
2 See its Web page at http://www.credit24.ee/ (most recently accessed on 31.1.2014).
3 K. Staehr, M. Kukk. The over-indebtedness of European households: Updated mapping of the situation, nature and causes,
effects and initiatives for alleviating its impact. – Country Report Estonia, 19.12.2012, p. 27.
4 Ibid., p. 24.
Karin Sein, Urmas Volens
Legal Problems and Regulations related to Easy-access Non-secured Consumer Loans in Estonia
JURIDICA INTERNATIONAL 22/2014
2008–2009 roughly a third of the debt-counselling cases involved clients who had accumulated arrears on
SMS loans.*5 The Ministry of Finance, however, estimates that at least 100,000 residents (out of Estonia’s
population of 1.3 million) have obtained instant loans.*6According to information from the register of ‘pay-
ment disorders’ supplied to the Ministry of Economic Affairs and Communications in October 2013, there
are 34,047 individuals who have a payment disorder resulting from an instant loan or other consumer
credit.*7 It has been reported that the number of clients of instant-loan providers is continuously growing
(mainly in the north-eastern part of Estonia and among the 25–30 and 55–60 age brackets).*8
Regardless of the absence of precise statistical data, one can state that consumer over-indebtedness
connected with instant loans is currently a very topical matter in Estonia.
This article analyses the current market situation involving instant loans in Estonia and social problems
related to them. Firstly, the authors provide an overview of the legal issues that have not yet seen full harmonisa-
tion via the European consumer-credit legislation and that are speciﬁ c to thisparticular type of credit product in
Estonia. Furthermore, the article covers the market situation and estimates related to the credit products active
in the market and possible numbers of creditors. Because there is no direct supervision of instant-loan provid-
ers, the authors are able to provide only unofﬁ cial and estimated ﬁ gures characterising the problems. Then,
the second part of the article provides a legal and institutional overview of the instant-loan market. The third
and fourth parts describe the consumer-protection measures currently in force in Estonia and assess whether
those measures have been functioning efﬁ ciently in practice. Finally, the ongoing discussions of further legisla-
tive measures are described and the associated legislative proposals evaluated.
2. The market situation and statistics
2.1. Overview of the creditors and consumers
Instant-loan providers are not supervised by Estonia’s Financial Supervision Authority (FSA). The FSA
monitors only credit institutions—that is, entities whose main activities are to give out loans and to accept
deposits.*9 Since the instant-loan providers do not accept deposits, they are not regarded as credit institu-
tions and hence are not subject to supervision by the FSA.
The providers of instant loans are regarded as private creditors, and there is no special supervision pro-
vided by law. They are subject only to the monitoring of the Estonian Consumer Protection Board (CPB).
The CPB follows the Consumer Protection Act*10 (CPA), which, in general, regulates the provision of ser-
vices or sale of products to customers. The CPB has only general supervisory power with respect to loan
providers, and it does not have the right to intervene in the relationship between the parties to the loan
contract. Therefore, eventually it is for the courts to decide whether a particular contract between a con-
sumer and a lender is valid or not and whether the lender has the right to claim for payment of the related
penalties, interest, and additional costs from the customer.
The problems related to instant loans became increasingly topical for the Estonian public in 2004–
2007, when there was a considerable upturn in the instant-loan-provision market. It is remarkable that
over 2006–2007 the total marketing costs of SMS-loan providers were comparable to the total market-
ing costs of the commercial banks active in Estonia. The extensive promotion of instant loans stopped in
2008, once default on debts had started to increase amidst global ﬁ nancial crisis. The instant-loan market
5 Ibid., p. 26.
6 Ministry of Economic Affairs and Communications (Majandus- jaKommunikatsiooniministeerium). Kiirlaenu-
turg − analüüs ja ettepanekud [‘The instant-loan market − analysis and proposals’], p. 8. Available at http://www.mkm.ee/
public/kiirlanuturg_analyys_ja_ettepanekud.pdf (most recently accessed on 24.4.2013) (in Estonian).
7 Chancellery of the Riigikogu, department of law and analytics (Riigikogu kantselei õigus- ja analüüsiosakond). Kiirlaenud –
olemus, probleemid ja reguleerimisvõimalused [‘Fast loans – their nature, problems, and options for regulations’]. – Riigik-
ogu kantselei õigus- ja analüüsiosakond, 21.10.2013 (No. 21). Available at http://www.riigikogu.ee/doc.php?177395 (most
recently accessed on 31.1.2014) (in Estonian).
8 Kiirlaenuturg – analüüs ja ettepanekud (see Note 6), p. 8.
9 Credit Institutions Act (Krediidiasutusteseadus). – RT I, 23.12.2013, 30 (in Estonian).
According to §3 (1) of the Credit Institutions Act, a credit institution is a company the principal and permanent economic
activity of which is to receive cash deposits and other repayable funds from the public and to grant loans for its own account
and provide other ﬁ nancing.
10 Consumer Protection Act (Tarbijakaitseseadus). – RT I, 31.12.2013, 7 (in Estonian).