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Finland slashes maximum payday loan interest to ease crisis fears

Some 400,000 people in Finland have taken out loans from payday lenders.

Payday lenders won't be allowed to advertise by SMS until at least the end of the year. Image: Henrietta Hassinen / Yle

Finland is to bring in legislation to halve the maximum interest firms can charge on payday loans to ten percent, and prevent them targeting borrowers by SMS or direct mail.

The measures were announced on Friday as the government unveiled a raft of proposals to help businesses and individuals through the economic impact of the coronavirus crisis.

"Around 400,000 Finns have bad credit records," said justice minister Anna-Maja Henriksson at a press conference in Helsinki.

"In this situation it is probable that the number will rise. That’s why it is necessary to further reduce the maximum interest rate firms can charge on loans. It is important to preserve the chance to take small loans, so we are halving the maximum interest rate on payday loans."

In 2019 Finland set a limit of 20 percent on interest rate charges for smaller loans and following implementation of the newly-announced law, the limit will be 10 percent.

Payday lenders will also be banned from using direct marketing methods, such as sending potential borrowers SMS messages or letters.

The measures will be in place until the end of the year.

Henriksson also said that the government would propose easing the rules on debt enforcement for companies, in an effort to reduce the number of bankruptcies during the crisis.

She added that company AGMs should not be held as usual during the coronavirus emergency, with remote conferencing one option and delaying meetings altogether another possibility.

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