Payday Loan, Collection Companies Agree to Pay Off High Costs of Credit Yle Uutiset
Payday loan company Euro24 Finance and debt collector Gothia reached an out-of-court settlement with around 150 previous clients, dodging a possible class action by the consumer mediator.
Last fall, the Ombudsman’s office began rounding up plaintiffs in a class action lawsuit against companies over fees associated with their loans. Although businesses must meet a cap on interest charged on loans, the costs of credit are not regulated in the same way.
The proposed lawsuit also targeted Lahti-based JW-Yhtiöt, owner of another instant loan company, Suomilimiitti. However, no agreement has yet been reached with this company.
The Consumer Ombudsman argued that the costs associated with Euro24 Finance’s fast loan of 2,000 euros are excessive. The company has now said it will pay the compensation demanded by the consumer watchdog, as has collection company Gothia, which bought out some unpaid debts from Euro24 Finance.
According to the Ombudsman, not only did companies impose excessive costs on customers, but their credit contracts were also not in accordance with the law. The Ombudsman said that all costs associated with invalid agreements should therefore be removed.
Although the companies continue to challenge the Mediator’s arguments, they nevertheless announced that they would pay a total of 336,000 euros in compensation to the more than 150 lender clients who said they would join a class action lawsuit in October and November of last year.
Following settlement, clients will only repay the principal of the loans they have taken out.
Collective action a good deterrent
The consumer ombudsman said the agency wants to use all available means to deal with the excessive costs of payday loans.
He said class actions are an option, although it is a tedious process for plaintiffs and defendants.
He noted, however, that the companies involved in the ongoing case had announced that they would settle the issue with consumers just as the ombudsman’s office was about to initiate legal proceedings in the district court.
“Companies want to avoid being defendants in a class action lawsuit. In this case, they finally decided that they preferred to pay the required sums rather than being dragged into a lawsuit which would probably last a very long time, which is expensive and which will probably not be good for their reputation “, ombudsman of the consumers Katri Väänänen said in a statement.
The consumer ombudsperson said he would always review the companies’ proposals and check whether or not they keep their commitments.