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Consumer advocate warns against interest-free loans and payment cards

The Consumers’ Union says interest-free payment cards that are currently advertised widely in Finland make it too easy for many customers to take on serious debt. Although the organisation has not come across anything strictly illegal, the union says aggressive marketing of the new service has already crossed the line when it comes to acceptable market behaviour.

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Increasing numbers of Finnish retailers are offering interest-free payment cards or loans these days in lieu of immediate payment. Aggressive advertising campaigns support the new service.

The interest-free payment option may seem like a reasonable way to pay for purchases, but Finland’s Consumers’ Union warns consumers against accepting too many of the cards or loans, as they can easily lead to insurmountable debt.

The Consumers' Union of Finland is a consumer advocacy organisation that looks after customer interests. The union’s senior legal advisor Tuula Sario says people that tend to accept multiple payment cards often tend to do so because the credit limits on their existing credit cards are already full.

“You could easily find yourself in a bind if your Visa card is maxed out and you need to pay monthly instalments on several other cards,” she says.

The terms can also be misleading in that the interest-free period is actually only valid for a certain time. To make up for the grace period, the interest afterwards can be brutal. Sario says it is a familiar marketing ploy.

“It’s only human that card holders forget to cancel their card once their debt is paid. Then when Christmas rolls around, it is really easy to just use it again,” she says.

If a store offers you a payment card, it is also a good idea to check if it can be used in other shops as well.

“For a consumer’s point of view, it is problematic that the card obliges you to patronise certain chains, for example. Once the debt has been paid off and it comes time to buy something new, you use the chain’s card regardless of what the items in the shop cost,” says Sario.

Marketing push has gone too far

The marketing of payment cards and payday loans has become very aggressive in Finland of late, and the Consumers’ Union says the principles of reasonable business behaviour have been compromised.

“We are aware of several cases in which a customer has volunteered to pay in cash and has instead been pressured into signing up for a retailer’s credit card. It can also be the case that customers haven’t even realised what they are getting into,” says Sario.

Heightened campaigns to persuade customers to sign up for the cards may even promise a commission for every card agreement a member of the sales personnel helps to write up.

Sario says that although the union is not aware of any strictly illegal activities at present, the law requires that a person’s credit history be checked before a company can extend credit. She says when shops are distributing cards in a matter of seconds, it is clear that a person’s ability to pay is not weighed accordingly.

“Both income and assets should be analysed in connection with the credit decision, but most companies are content to just ask the monthly income amount.”

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