Temporary Consumer Credit and Insolvency Measures Related to COVID-19 in Finland

Authors: Senni Mäki-Hallila, Olli Mäkelä and Henrik Mattson

The Finnish Ministry of Justice is currently preparing a number of temporary crisis measures to relieve the financial distress of consumers and companies caused by the COVID-19 crisis. The proposed measures relating to consumer credits and insolvency are listed below.

The situation is developing very quickly, and this blog post is up to date only as of the moment of its publication.

Restrictions on Interest and Direct Marketing of Consumer Credits

Today, 3 April 2020, the Finnish Ministry of Justice announced that it is preparing a legislative change that will temporarily decrease the amount of permitted interest (Fin. korkokatto) on consumer credits from 20% to 10% per annum. The Ministry is also working on a prohibition of direct marketing (e.g. marketing by telephone or emails) of consumer credits.

The Ministry of Justice is expected to publish a proposal on the implementation of the temporary measures in the coming weeks, but as of today, it has not yet been announced when the temporary measures will take effect. The temporary measures are expected to remain in force until the end of 2020.

Debt Collection Cost Restrictions on SME Debts

The Finnish Ministry of Justice also announced today that it is planning to temporarily extend the restrictions on debt collection costs applicable to consumer debts to the collection of debts from small and medium sized (SME) companies as well.

As above, a proposal on the implementation of the temporary measures is expected in the coming weeks, but it is unclear when the temporary measures will take effect. The temporary measures are expected to remain in force until the end of 2020.

Limitation on Creditors’ Right to Apply for Bankruptcy

On 28 March 2020, the Finnish Ministry of Justice announced that it is preparing a temporary reform of the Finnish Bankruptcy Act to restrict a creditor’s right to apply for a debtor’s bankruptcy. The reform will temporarily remove the assumption of insolvency due to short-term payment default as grounds for a creditor's bankruptcy filing. This assumption is most commonly used to prove the debtor’s insolvency when a creditor is applying for a debtor's bankruptcy. A creditor can also seek to prove the debtor’s insolvency in other ways, but this is generally more cumbersome.

Changes to Enforcement and Better Access to Corporate Restructuring

The government intends to help debtors who are subject to enforcement proceedings (Fin. ulosotto) by providing incentives for creditors to use flexible collection measures, such as granting payment-free months and lengthening payment periods.

Tweaks to the corporate restructuring (Fin. yrityssaneeraus) framework are also underway. The Advisory Board for Bankruptcy Affairs has already issued a recommendation suggesting that, in the current situation, the inability to repay new debts for a company undergoing restructuring proceedings should not necessarily lead to the discontinuation of the proceedings. The Finnish Ministry of Justice is also assessing the need for reforms to ease Finnish companies’ access to corporate restructuring. 

Other Measures

Finland has published a number or other crisis measures relating to government funding, lowering of banks’ capital requirements, extending the deadline for preparing financial accounts, and temporary reforms in employment law.

Our Finance & Restructuring and Financial Regulatory Services teams assist market participants with coping with the crisis measures.