Regulation of Instant Loans and Other Credits in Swedish Law
Keywords:consumer credit, responsible lending, instant loans, interest-rate restrictions, over indebtedness, debt restructuring, debt adjustment
Since the deregulation-oriented reform in Sweden in the 1980s, the range of consumer loans has increased dramatically and Swedish households have increased their debt levels significantly. In consequence, many people experience problems repaying their loans, in particular with instant loans often used to solve urgent payment problems. In 2012, there were 53,709 applications for an order for repayment of instant loans filed with the Enforcement Agency. This represents an increase of 40% when compared to 2011 levels. According to the Enforcement Agency, about 50,000 persons in Sweden have a record of non-payment registered with the Enforcement Agency because of instant loans.
The aim of the paper is to give an overview of the legal regulation of the Swedish consumer‑credit market, particularly shedding light on the legal weakness of the rules protecting the debtor from over-indebtedness in the Swedish consumer-credit market. Firstly, we intend to outline the types of creditors and credit institutions offering credit to consumers and the various credit categories they offer, like mortgage loans, mobile-phone subscriptions, e-trade invoices, or instant loans. According to statistics from the Enforcement Agency, it is not uncommon that the first order to pay has to do with a mobile-phone subscription, the second with e-trade, and the third with an instant loan.
Secondly, we will investigate the legal regulation that is relevant for both debtors and creditors in the consumer-credit market. The Swedish regulation includes administrative measures for this purpose (in particular, licence requirements and marketing restrictions); contract-law measures, such as unconscionability and responsible lending doctrine; and insolvency measures – for example, the Debt Restructuring Act and the Act on Order for Payment Procedure. Finally, we will mention the current legislative developments aimed at improving the situation for people who have difficulties in paying back the creditors.