The Financial Supervisory Authority made a report on credit institutions’ practices related to consumer credit. The study showed that the growth of consumer credit has been driven by lending financial institutions.
Special attention has been paid to marketing and accessing consumer credit, and consumers are increasingly offered financing options through various channels.
Growth in consumer credit
Growth in consumer credit has also been sought by loosening the criteria for granting loans, raising the maximum amounts of loans and extending loan periods. Some financial institutions have taken more credit risk than before. This is partly due to the increase in credit-related payment delays compared to the broader consumer credit portfolio.
Identified shortcomings in compliance with the rules. Loan decisions are sometimes made with too little information and the creditworthiness assessment of the customer remains incomplete.
The impact on creditworthiness of any increase in interest rates
For example, the following information is not always clarified: the borrower’s debt information, other types of assets, the quality of the employment relationship, and the impact on creditworthiness of any increase in interest rates. In addition, unsecured loans are also granted for the purchase of a home in violation of the principles of the Code. Financial supervision requires all its supervisors to address regulatory gaps.
Assessment of the borrower’s creditworthiness and possible reasons
In the report, the Financial Supervisory Authority asked financial institutions to describe, among other things, the available credit granting criteria, the assessment of the borrower’s creditworthiness and possible reasons for the growth of the stock of consumer loans.
The supervisors of the Financial Supervisory Authority, who had high consumer loan volumes or high growth rates of consumer loans, were selected for the study. The survey included domestic financial institutions, branches of foreign lenders operating in Finland, and foreign financial institutions that offer consumer credit across the border to Finland.