Insights | December 12, 2019

The Consumer Ombudsman plans to file Finland’s first class actions

After a campaign by the Finnish Consumer Ombudsman, approximately 1 500 people have registered in advance for a class action or petitioned for assistance in cases against two instant loan companies. The Consumer Ombudsman will now start negotiations with the companies. Should the negotiations fail, the class actions will be filed with the court. If filed, they will be the first class actions ever brought in Finland since the Class Actions Act came into force in 2007.

Recent developments

The Consumer Ombudsman is currently considering filing class actions against two instant loan companies. Both of these companies have granted running account credits of EUR 2 000 with an annual percentage rate of interest of over 300 percent.

From the Consumer Ombudsman’s point of view, these types of loans are part of a bigger problem which the legislator has tried to solve in different ways without success. According to a recent report by the Finnish Competition and Consumer Authority (FCCA), instant loans are a common reason for consumers to seek help from consumer authorities, and there seems to be a close connection between instant loans and problems related to gambling addiction. For example, the FCCA received 554 complaints concerning instant loans over the course of 13 months between 1 January 2018 and 31 January 2019.

Now, the prevalence and persistence of the adverse effects linked to instant loans has made the Consumer Ombudsman consider resorting to class actions for the first time in Finnish history.

The Consumer Ombudsman started the process with an active campaign calling for people to register in advance as class members. By the end of the campaign, on 22 November 2019, more than 1 500 participants submitted an advance registration. Fifteen percent of those registered petitioned for assistance from the Consumer Ombudsman on the basis that their debt was already pending in court and cannot therefore be included in a class action.

It can be noted that the advance registration procedure utilized here is not provided for in the Class Actions Act (444/2007). However, it can be considered well-reasoned and practical, as filing a class action requires that a large group of individuals have claims against the same defendant based on the same or similar circumstances. The advance registration allows the Consumer Ombudsman to find out beforehand if these requirements will be met.

What happens next?

The next step is that the Consumer Ombudsman will start negotiations with the counterparts and try to reach an amicable settlement. According to the Consumer Ombudsman, they will seek total annulment of the credit cost provisions. This would mean that the class members would only pay back the principal on the loan.

Should the negotiations fail, the class actions will be filed with the District Court of Helsinki, which has sole jurisdiction to hear class actions in Finland. All debtors who want to become class members in the class actions must register within the time limit specified by the District Court. This applies even if they already registered in advance this fall.

The Consumer Ombudsman has stated that the number of class members may increase considerably, as there are tens of thousands of debtors who are facing the consequences of the instant loans granted by the two companies against which the Consumer Ombudsman is acting.

Legal Background

In Finland, the Class Actions Act has been in force since 1 October 2007. However, as of 2019 no class actions have ever actually proceeded to court.

Under the Class Actions Act, the Consumer Ombudsman has exclusive standing to bring a class action in a court and to exercise the right of a party in the action. In what is known as the “opt-in” procedure, the ruling given in the class action binds all class members who registered within the given period. The scope of the Act is strictly limited to consumer protection, and disputes concerning securities trading and business to business transactions fall outside of the scope.