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Finance committee proposes 20% interest rate cap on payday loans

Earlier this month the finance ministry put forward a bill to place a 30 percent cap on interest rates on quick loans.

Pieni summa käteistä rahaa.
File photo of money on table. Image: Emilia Malin / Yle

Finland's Finance Committee said it wants lawmakers to consider whether consumer access to so-called payday loans is actually necessary or appropriate. The committee proposed several measures to help address problems linked to the quick loans that carry high interest rates and fees, in another attempt to deal with the major risks and problems that payday loans can pose.

One of the measures proposed by the committee is to place a 20 percent cap on payday loan interest rates.

Earlier this month the finance ministry put forward a bill to legislate a 30 percent cap on interest rates on such loans.

If interest rates are capped, payday loan firms would need to more carefully check whether potential borrowers are actually able to pay back the loans. Currently quick loans are being marketed to people with bad credit histories.

In January the Guarantee Foundation, a group that helps individuals solve financial problems, reported that people of all ages are increasingly paying off old loans by borrowing more money.

The foundation also said that people under the age of 25 appear to be taking on increasing amounts of consumer debt and borrowing smaller amounts of money.

Philosophical consideration

The finance committee also addressed the problems facing people who are already over their heads in debt, saying it would like government to examine how much money a consumer should have a right to keep after undergoing debt restructuring

The committee also recommended that the government do more to prevent consumers from falling into uncontrollable debt in the first place.

The committee proposed placing limits on the marketing strategies of payday loan firms as well as improve consumer access to so-called social loans, which are commonly offered by cities and municipalities to residents.

The committee said that educational institutions should offer students practical courses about finance and economics.

Moreover the committee said it wanted MPs to examine the issue of payday loans more philosophically. It asked lawmakers to fundamentally consider whether quick loans are necessary or even appropriate.

The finance committee is responsible for dealing with government budgets, long-term budgetary planning, legislation regarding taxes and other financial matters.

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