Supervision release 22 March 2018 – 18/2018

Consumer credit study – criteria for granting credit have loosened and regulatory compliance shortcomings are evident in credit institutions

The Financial Supervisory Authority (FIN-FSA) has studied credit institutions’ consumer credit practices. The study revealed that credit institutions have promoted growth in consumer credit in many ways. Consumers are increasingly being offered more financing options via different channels, and credit institutions have invested in marketing and digital availability of consumer credit.

​It is cause for concern that growth has also been pursued by loosening the criteria for granting credits, raising the maximum amounts of credit and extending loan periods. In other words, many credit institutions are consciously accepting more credit risk than before in consumer credits. In the case of some supervised entities, this is reflected in an increase of payment delays in relation to the stock of consumer credit, which cannot be considered a desirable development.

In addition, the FIN-FSA identified shortcomings in regulatory compliance. In some cases, credit decisions are made on the basis of too little information, in which case the assessment of customers’ creditworthiness is inadequate. For example, credit applicants’ credit data or debt service expenditure, other financial situation information and the nature of their employment relationships are not always investigated, nor is the impact of a possible rise in interest rates on their creditworthiness, even in the case of large consumer credits. It was also observed that unsecured consumer credits are being granted contrary to the spirit of regulation also for house purchases. The FIN-FSA requires of its supervised entities that they correct shortcomings in regulatory compliance. 

Credit institutions were requested to describe to the FIN-FSA, for example, the criteria they apply for granting credit, how they assess consumers’ creditworthiness, and the reason for the growth in the stock of consumer credit. Supervised entities that have large stocks of consumer credit or large consumer credit growth rates were selected for the study. The assessment covered domestic credit institutions and branches of foreign credit institutions operating in Finland, which together accounted for around 90% of all supervised entities’ stock of consumer credit. Foreign credit institutions that offer consumer credits directly across the border of Finland were also included.

This year, the FIN-FSA plans to make inspections in relation to the granting of consumer credit in a number of companies that participated in the study.

For further information, please contact:

Torsten Groschup, Banking Inspector, tel. +358 9 183 5333 or torsten.groschup(at) 

The corresponding Finnish-language supervision release was published on 19 March 2018.