Next year, the map for blank loans will have to be redesigned considerably. The reason is that there will most likely be new legislation on interest rate ceilings and cost ceilings for unsecured loans. The reason is that it is important to regulate the maximum loan cost in order to prevent borrowers from falling into a difficult financial situation.
Big increase in blank loans
In recent years, the indebtedness among the Swedes due to the blind loans and the fast loans has increased sharply. According to Statistics Sweden, the total loan stock amounts to over SEK 200 billion. This figure includes all unsecured loans, such as private loans, quick loans and various types of credit accounts.
Of course, SEK 200 billion is nothing compared to the total outstanding loan stock for mortgages. However, there is a significant difference between mortgages and blank loans. The security of the property itself means that the mortgages are a safe investment for the mortgage companies, while the fact that for collateral loans there is no security automatically means that the loan costs become larger. For certain types of loans, especially those at very modest amounts, the costs in terms of fees and interest may amount to a significant portion of the loan amount.
The Government does not look with gentle eyes on the development of the consumer credit market and, in various stages, regulations have been introduced to increase consumer protection. The most recent given is a bill on interest ceilings and cost ceilings. If the legislation comes into force according to plan, the new rules will start to apply on 1 September 2018.
Brief about the new rules
It is a whole package of rules that the government has produced. This includes new rules on marketing and also that certain loans should always be termed as high-cost credits. The most important thing, however, is new rules that set a limit on how much a loan can cost the borrower.
Firstly, the government wants to introduce an interest ceiling. This ceiling must be fixed at 40% above the reference rate (the Riksbank’s repo rate). As of September 1, 2018, interest rates (including interest on late payments) may not exceed 40% + the repo rate of the loan amount.
Secondly, a cost ceiling will be introduced. This ceiling is about the total costs of the loan both during the term, in the event of an extension and in the event of termination of the loan (when the loan goes to the Danish Kronofogden). The ceiling is proposed to be 100% and below it, both interest, fees and collection costs must be accommodated.
Example: For a loan of SEK 10,000, the total costs cannot exceed SEK 10,000.
Consumer protection in focus
It is after all the individual’s obligation to take care of their own finances, but the state can still be said to have an obligation to protect consumer protection. Loans with high costs can cause problems both in the short and long term, and the most precarious situation can be in case a person has to take new loans to afford the borrowing costs for an existing one.
The government has issued a press release on the grounds that the case is now going out on a law council’s referral. Here, financial market minister Per Bolund believes that the government wants to do so that consumers do not need to feel the same concern that a debt continues to grow and becomes impossible to handle. It remains to be seen how companies in the blanket loans and small loans will react to the legislation and adjust their loans.