Estonia, Financial Services, Loan, Society

Nearly 600 of these accounts belonged to children who were younger than 13 years.

Using speed loans that have huge interest rates is one of the most painful social problems in Estonia since thousands of families suffer because of obligations that exceed their means and are often taken without thinking of consequences.

Swedbank reached its discovery by holding a lottery for kids who often pay with their "School card" bank card, meant for 6-12 year old kids. When drawing lots for winners, bank employees noticed that accounts of several minors were connected to a speed loan. The bank then analysed accounts of all minors. "A sad fact emerged that there were 1,290 such accounts," said the bank's communications manager Kristi Roost.

The speed loans or SMS loans were not taken by kids since speed lending companies are not allowed to lend to minors. Parents can use children's bank accounts and cards though and parents who have taken too big loans and whose bank account use is thus restricted at the demand of creditors, do it.

"In principle, this is use of a child's identity that leaves a trace in the credit history of the minor that can become later an obstacle for the person getting a loan," explained Roost.

SEB bank's private persons' direction development manager Triin Messimas said that when analysing loans, they have also noticed that parents transfer to kids accounts large amounts of money that is not pocket money. "This is stupid behaviour, aimed at covering up one's obligations. People hope that the bank doesn’t investigate where the money goes. But we want to know if these are binding obligations when we see how larger amounts of money are regularly transferred to accounts of children or relatives," she said.

Swedbank said that it takes abuse of children's accounts very seriously and thus supplemented general conditions of providing its services. Roost said that hopefully the legislator will also do something about speed lenders soon.

Debt councillor Ülle Schmidt said that even up to a half of Estonian people moving abroad could be speed loan "refugees" while private individual's bankruptcy is also becoming more popular. She added that accounts of around 100,000 people are under the control of court executors in Estonia, meaning that the person can use only a minimum wage share plus the share of dependants of the money at the bank account while the rest of the income is automatically transferred to creditors.