Estonia: State seeking to abolish strict ad restrictions on consumer credit providers

TALLINN - The Estonian Ministry of Economic Affairs and Communications is seeking to abolish strict advertising restrictions on providers of express loans, which were imposed only three years ago when the state decided to harshly organize the express loan market, the daily Postimees writes.

At present, an express loan advert is allowed to contain only mandatory information, for example the interest rate, the annual percentage rate of charge, and the company's contact details. According to the bill, the restriction would be revoked and, in the future, the lender could advertise anything they want alongside the mandatory information. "This amendment does not affect other consumer credit advertising requirements, thus still preventing the ad from becoming attractive," Kristi Talving, deputy secretary general of the Ministry of Economic Affairs and Communications for the internal market, said.

According to Talving, advertising must continue to be responsible and balanced. "It must not leave the impression that borrowing is simple and risk-free," she said.

Thus, slogans like "easy loan", "favorable leasing", "not a single hour without money" and other such phrases that were still used three years ago will still be banned. Although slogans will continue to not be used, the law amendment would allow consumer credit providers to publish more information about themselves, such as publishing content marketing articles, Postimees said.

According to the ministry, the amendment would help improve competition and innovation on the express loan market. The same is believed by consumer credit providers themselves. "A good comparison here would be purchasing a car. When it comes to buying a car, one always looks at the model's advantages, prices and why some cars are more durable than others. The new law would allow the client to do the same with an express loan," Ivo Popp, head of consumer credit provider Credit24, said.

However, Ester Saag, members of the management board of the Estonian Creditors Association, is not quite as optimistic. She said that the amendment would be welcome is consumer credit providers gave people unbiased information. "However, I am afraid that the advertising will be of a kind where only indicators that are good for the consumer credit provider will be highlighted," Saag said.

Thus, the providers of express loans could explain in depth that the borrower can use payment leave and change the terms of the contract, but this might not be in the interest of the borrower at all. "This leaves people with a deceptive image, that if they encounter payment difficulties, they will just go on payment leave and continue paying it back later. The fact that a loan's incidental expenses will increase with payment leave is not highlighted and the borrower may not think about that," Saag said.

Saag, a debt counselor, only became aware of the fact that the ministry is planning an amendment to the advertising restrictions when it was mentioned by Postimees.

When drawing up the bill, the Ministry of Economic Affairs and Communications never consulted with debt counselors. However, deputy secretary general Talving said that no one was left out intentionally.