Finland Plans To Amend Rules On Loans Granted Via Texting

November 11, 2008 1:24 p.m. EST

Helsinki, Finland (AHN) - Finland's Justice Ministry proposed the prohibition of midnight loans granted to consumers via short messaging services to curb irresponsible borrowing.

Borrowing money through text messaging became popular in Finland the past three years. The process is very simple. Loan applicants will send an SMS with the amount requested, address, personal identity number and bank account number. The data is counter-checked with an online credit database.

If the applicant passes the credit check and has no bad credit record, the borrower is notified of its approval via text, which could be withdrawn anytime. No collateral is needed.

The ease of entering into a debt has helped to cause the debt of young Finns to rise the past few years. Finns in the 20-to-39 age brackets have an average debt of $75,672 (60,000 euro), although the bulk of that amount is mortgage loans.

Money borrowed through cell phones during the second quarter averaged $214 (170 euro), which was typically paid back after 28 days. However, despite the small amount involved, the number of SMS loans which reached the courts went up to 8.7 percent to over 113,000 loans for the first 9 months of 2008, according to Suomen Asiakastieto Oy, the firm which maintains Finland's credit database.

To prevent more Finnish youth from falling into the midnight debt trap, the Justice Ministry proposed SMS loans applied for after 11 p.m. should be granted at the earliest after 7 a.m. of the next day.