Finnish Consumer Law Changes

The Finnish parliament has approved an amendment to the Finnish Consumer Protection Act (38/1978) introducing a new provision regarding the display of payment solutions online.

 

This provision is applied to the payment phase of the online purchase of goods and services in an effort to steer consumers away from deferred payments and accumulation of credit:

  1. First, if an online merchant offers various payment methods, and at least one payment method that does not involve the extension of credit to the consumer, this payment method should be presented first. Secondly in the list of payment methods, should be methods with the option of credit extension, such as multi-use cards or payment applications that may be connected to a credit card. Last in the presented list should be payment methods that involve the extension of credit, such as credit cards or applications which invariably imply using credit.
  2. Additionally, in the case where merchants offer various payment methods, none of these should be pre-selected. This applies to each separate purchase, meaning that returning customers should make the decision for each purchase separately and payment methods should therefore always be listed in the order above. This however does not restrict the use of pre-saved card information in purchases from mobile stores.
  3. Finally, when a consumer chooses a payment method that constitutes deferral of payment, the trader offering that payment method shall verify the identity of the consumer upon acceptance of the payment method using an identification method that meets the requirements of the electronic identification system referred to in Section 8 of the Law on Strong Electronic Identification and Electronic Trust Services (617/2009) or Section 8 of the Payment Services Act (290/2010) the requirements for strong identification referred to in paragraph 24 and 85c (4).

The new requirements are imposed not only on the online merchant but also on their payment service provider (‘PSP’), creditor, and other trader to the extent that they may have affected the presentation of payment methods through contractual term they have in place with the merchant.

According to preparatory works to the amendment, it is possible, although exceptional, that when choosing the online payment offered by banks, the consumer also has a credit account to choose from. This alone would not lead to the fact that online payment offered by banks may not be offered in the first group of payment methods listed in the amendment.

The concept of credit in this context is intended to be understood in the wider sense and encompasses for example a deferred payment or an increase of the amount available over a credit account.

In regards of cases of identification of the consumer that do not fall under of the Law on the Prevention of Money Laundering and the Financing of Terrorism (444/2017), the PSP referred to shall retain the information on the basis of which the identity of the consumer has been verified, for a period of five years after the receivable is fully due. However, in the case of a dispute over the contract or payment, the verification information shall be kept until the matter is agreed or resolved.

Excluded from the provision above are cases where the purchase is paid for with consumer credit; where the consumer pays for the purchase upon the arrival of the goods; the service under the contract is performed by means other than remote communication and deferral of payment is offered by the service provider themself or the purchase takes place through telesales. Additionally in the case of a standing order with an agreement on a billing the cycle, it is sufficient to identify the consumer upon the signature of the initial agreement.

The amendment will enter into force 1 October 2023.

Rationale for the amendment

The purpose of the provision is to direct consumers to primarily use payment methods other than deferred payment or extended credits. The aim is to lower the interest cap on consumer credit from 20 % to 15 %. At the same time, however, the interest rate cap would be linked to the reference rate referred to in the Interest Rate Act so that the rate should not rise above 20% under the credit agreement. The change is designed to try to reduce consumer over-indebtedness by limiting creditors opportunities to extend credit at the current credit risk level. In addition, the amendment aims to reasonably price credit, particularly in view of large and long-term loans.

What are potential sanctions?

PSPs non-compliant to the provisions may be prohibited from continuing or renewing practices endangering customer protection. Non-compliant practices may also be sanctioned with a fine determined by consumer protection authorities. The fine will be set on a case-by-case basis considering the circumstances of the breach as well as the financial situation of the PSP. The fine imposed on the PSP shall not exceed 4% of the turnover for the year preceding the end of the infringement in question. If the financial statements are not yet completed when the penalty fee is imposed, or if the business has just been started and the financial statements are not available, the turnover can be estimated based on a statement of other claims.

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