Finns are borrowing more than before and registered default payments have reached record levels. The aim is to curb over-indebtedness by intensifying debt counseling and limiting the cost of interest on consumer loans.
The bill wants to set a 20 percent interest rate cap on loans over $ 2,000. With the over-indebtedness of Finns increasing, the bill is not expected to be much resistance and the new interest rate ceiling law is expected to enter into force on 1 September 2019.
Instant tips issued by online financial services
Companies are widely regarded as a source of national over-indebtedness. However, the growing national over-indebtedness cannot be explained by the mere proliferation of instant nipples. Debt spiraling is at its worst when debt is paid to several different parties simultaneously. The simultaneous payment of a bank loan, consumer credit, credit card, rent, or mortgage can quickly plunge your personal financial management track.
The cost of consumer credit was first limited in 2013. At that time, a 50% interest rate cap was set for consumer credit below USD 2,000. As a result of the legal reform, the annual percentage rate of charge for a loan of less than USD 2,000 was not allowed to increase by more than 50%. However, consumer credit lenders quickly came up with a way to get around the interest rate ceiling: although the customer applied for a $ 100 loan, he was immediately granted a loan of over $ 2,000, allowing the lender to easily apply a higher interest rate on the loan.
The new bill proposes to limit interest rates on loans over $ 2000
- With the new Interest Act, a 20% interest rate cap will be set for loans over USD 2,000.
- The lender's right to charge the borrowing costs is severely restricted: the borrowing costs shall not exceed USD 150 per year and the borrowing costs shall not exceed 0.01% of the amount of the credit agreement per day.
- The new law also limits the lender's right to charge additional costs for extending the payment period.
- The intention is to prevent circumvention of the interest rate law by imposing substantial sanctions on breaches of the interest rate cap regulation. Failure to comply with the new terms and conditions shall not result in the consumer being charged any interest or other borrowing costs.