Government approves quick loan ads ban (1)
The government has sent to the Parliament a bill, which, if passed, will prohibit radio and TV channels from airing consumer loan commercials.
The government has given its approval to the changes to the Advertising Act, which will set more stringent requirements to the content of consumer loan ads and ban them from radio and TV.
Commercials of housing loans, payment by installment, leasing and credit cards will not be subjected to the ban, which aims to gain some control over the problematic quick loan market.
Quick loan providers have been criticized for predatory practices that result in a vicious cycle. More than 30 percent of the approximately 100,000 people in the country who have borrowed from such companies have developed problems paying off the loans.
"The objective of the bill is to reduce the number of people, who take out loans under emotional impulse, instead of making a calculated decision," said Economic Affairs Minister Urve Palo, adding that the commercials have created a misconception that a payday loan is a quick fix to everyday financial worries.
The bill will not prohibit the companies who offer consumer credit from promoting their brands through other media channels, if this is done in compliance with the principles of responsible lending and the ads only include information prescribed by the law. The ads would have to refrain from making ambiguous promises and maintain a neutral tone by limiting the information to the service provider's name and details of the service they are providing.
Out of the 112 commercials that the Estonian Consumer Protection Agency checked, 70 did not adhere to the the principles of responsible lending that were set in July 2013.
Credit providers are also allowed sponsor ads, which do not qualify as commercials.
The ban has been criticized by commercial media outlets, who stand to lose 3.6 million euros of advertising revenue as a result.
Ad ban is part of a larger package of measures designed to curb the quick loan market. The Ministry of Economic Affairs and Communication is also working on bills that would subject the lenders to interest ceiling restrictions and collection costs restrictions, among others.