Korkokatto

Korkokatto, literally “interest ceiling” in Finnish, is a policy instrument that sets a legal maximum on the cost of consumer credit. It aims to limit the total annual percentage rate (APR) and the fees that lenders may charge a private borrower. The term is used in Finnish public discourse to describe efforts to curb high-cost lending practices, especially in relation to payday loans and other high-cost consumer credit.

In Finland, korkokatto typically refers to proposals or regulations that would cap APR and charges on loans extended to private individuals. The rule would generally cover loans such as personal loans, small loans, and credit lines, while excluding mortgages and most business lending. Enforcement and oversight would fall to authorities responsible for consumer protection and financial supervision, such as the Finnish Competition and Consumer Authority and the Financial Supervisory Authority.

Policy status: As of the early 2020s, Finland had debated introducing a general korkokatto, but no broad nationwide cap had been enacted. Instead, policy has emphasized transparency, disclosure of APR, limits on penalties, and actions against abusively high rates by lenders under existing consumer protection and financial regulations. Some proposed drafts have circulated in parliament and among interest groups.

Impact and criticism: Supporters argue that a korkokatto protects consumers from predatory lending, reduces debt distress, and simplifies cost comparisons. Critics contend that caps can reduce access to affordable credit for high-risk borrowers, push borrowing underground or toward regulated lenders with higher fees, and limit competition. The debate continues as part of broader consumer-credit regulation.