TALLINN - Police have received about 30 complaints from credit fraud victims since Aug. 1, 2006, when the Finnish company Ferratum began offering credit via text messaging, the Eesti Paevaleht reported on Oct. 18. Believe it or not, but obtaining credit via text messaging (SMS) has become quite popular in Estonia, with two companies already providing the service. This modern form of lending was developed in Finland and Sweden.
All the customer must do is send an SMS with his or her personal identification code and bank account number. If the applicant has a clean credit record, the money is placed directly in his or her bank account.
An Estonian branch of the Finnish company Ferratum, which also operates in Sweden, offers loans from 1000-3000 kroons (64-192 euros) that must be paid back in either 15 or 30 days. A fee is added to the loan at an interest rate of between 17-30 percent. The other company operating in Estonia, SMS laen OU, offers similar rates.
According to Ferratum board member Jaanus Karp, the company has already seen many applicants.
"We don't reveal the exact number of requests, but the number is in the thousands, with thousands being approved," Karp told The Baltic Times.
The representative didn't mention the recently publicized cases of fraud, saying only that, "right now we have a high number of applicants, but also a high number of denials, this is something we are working on."
SMS loans under 200 euros do not require a written contract, and are also exempt from the Estonian law of credit institutions.
Enn Riisalu, an adviser at the Estonian Banking Association, said the main problem was that, "in Estonia, individuals don't consider bank account numbers and personal identification numbers as confidential data, and are unaware that it could be used to enter contractual agreements with SMS lending companies."
"The personal identification numbers of Estonian ID-card holders can be found on the Internet, which makes the execution of fraud schemes even easier," he added.
Riisalu welcomed media discussion of the scandal. "We support media that cover such fraud schemes in order to educate people and turn their attention to possible risks."
Despite the dangers of SMS credit fraud, it seems that the Finance Ministry has not yet developed an efficient method against the problem. Perhaps the phenomena is still too new.