The coronavirus crisis has led to an increasing number of people in Finland defaulting on debts, according to data collected by the financial data services firm Asiakastieto.
The number of consumers with poor credit has risen by 2,300 in just the last three months, bringing the total figure to 392,000.
This represents an increase of about 6,000 people from last year’s record high.
Asiakastieto's business director Jouni Muhonen told Yle that the credit-tracking firm is especially concerned about the direction and pace of debt defaulting among men.
"Ten percent of men have defaults, and it’s more than 16 percent among men in their thirties. Defaults have also increased among women, but at a much slower rate," Muhonen said. "However, it is nice to note that the number of people under the age of 30 with defaults, both women and men, has continued to fall. So there is hope."
Measures introduced to prevent indebtedness
In the exceptional circumstances created by the coronavirus crisis, both lenders and the government in Finland have taken a number of measures aimed at preventing over-indebtedness.
For example, banks have offered a record number of instalment-free contracts to their customers during the past spring and summer, while the interest rate cap on consumer credit was lowered for the second time in July.
Asiakastieto predicts however that lowering the interest rate cap will lead to a further increase in payment defaults.
"Breaking the uncontrolled credit cycle is a good thing, but giving credit to an insolvent customer is not a long-term profitable business strategy. The low interest rate ceiling has also reduced the long-term consumer's ability to obtain so-called bridge financing, for example during a furloughing period," Muhonen said.
Further measures, such as lessening the amount of time a default note remains on a consumer's record so that over-indebted consumers can clear their credit information more quickly, have also been discussed.
"The removal of default marks is considered a solution to over-indebtedness, but it is not. Shortening the recording times would only reduce the amount of information available for assessing solvency, even though a 3 to 4-year-old default note indicates that the credit risk is still clearly elevated," Muhonen explained, emphasising that the need for more action is not limited to cash loans, as consumers also become indebted because of rental arrears, e-commerce purchases, public payments and many other commitments they have made.