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Payday loans collapse after interest cap

Statistics Finland says that the number of payday loans issued in Finland is just a quarter of what it was in 2013. The collapse in lending follows the introduction of new rules limiting the amount of interest companies can charge.

Setelirahakäärö.
Image: Henrietta Hassinen / Yle

Finns are taking out fewer payday loans this year after new legislation came into force aimed at curbing the industry’s excesses.

Last year more than 350,000 short-term, high-interest loans, worth around 96 million euros were taken out in Finland between January and March. This year just 69,000 loans worth 44 million euros were made over the same period.

The amount borrowed rose from an average of 275 euros to an average of 638 euros. This follows the introduction of rules limiting the interest rates companies could charge. While before payday loan rates could be well over 100 percent, now companies can charge a maximum annual rate of 50 percent on top of the reference rate.

The number of firms offering credit has also fallen since the new rules came into force, while companies that stayed in the business have had to modify their products to comply with the new regulations. Right now the southern Finland regional administration has 47 firms licensed to offer credit. Last year there were more than 80.

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