Ministry of Economic Affairs: Restrictions to remain in place on loan ads

Planned amendments to the Advertising Act will provide customers with more information about the conditions of quick loans, but current advertising restrictions will still continue to apply, thus preventing ads from being made attractive, the Ministry of Economic Affairs and Communications.

Legislation currently in force limits the advertising of information regarding loans, leases and installment loans to customers; both the product and borrowing terms may not be included in a single advertisement.

Currently, when a consumer is shown a car ad, the ad may not display lease terms and their accompanying obligations, and thus the consumer lacks sufficient information for making an informed decision, Deputy Secretary General for Internal Market Kristi Talving said.

According to the planned amendment, loan providers would also be given the option to include borrowing terms, such as interest, repayment terms, the size of monthly payments and the total price, in their ads.

“More detailed discussion of borrowing terms increases competition on the loan market,” Talving highlighted. “Greater choice and transparency also helps borrowers find the most suitable option for them.”

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Principles for responsible lending were adopted three years ago, and according to the ministry official, no concessions will be made in terms of said principles.

“An ad may not give the impression that taking out a loan is a risk-free and easy opportunity to solve one’s financial problems,” she said. “The goal is to prevent consumers from borrowing too willingly in the heat of the moment and without familiarizing themselves with borrowing terms.”

Borrower must be capable of paying

Loan providers are obligated to ensure that an individual seeking to borrow, lease or take out an installment loan is capable of repaying the borrowed sum without any issues. If an applicant is unable to do so, they may not be granted a loan under the amended legislation either.

Loan providers must also possess an activity license, and their activities are monitored by the Financial Supervision Authority, which has the power to revoke this license should a loan provider violate advertising requirements.

“The market has stabilized over the past five years,” Talving said. “The share of past due loans in the total sum of loan portfolios is less than five percent, and we have ten times fewer loan providers than we did in 2014. Thus, it is now time to allow consumers to make a more informed choice.”