In a new bill , the Government intends to set an interest rate ceiling on all loans, where effective interest rates may amount to a maximum of 40 percent. The reason, according to the government, is to
” Create a more responsible market for fast loans and other high-cost credits”
There are also other measures in the bill. In addition to the interest rate cap, a ceiling is also set on other fees; all inclusive, the cost of the loan may never exceed the loan amount. Thus, a loan of SEK 1000 may never cost more than SEK 2000. In addition, it also proposes rules regarding deferral fees; Customers may only extend the repayment period once for a fee. If further delays are made, it must not be done at the customer’s expense.
This type of legislation is not new; it has been done before in Finland, among others. The argument has been that the interest rate ceiling will phase out the smaller loan amounts, thus excluding the customers with the lowest credit rating. Although the Government in their bill believes that this has lowered the number of unpaid loans in Finland, a new report has shown that the average loan-to-value ratio has increased. Thus, there is good evidence that the end result will be positive for consumers. But the idea is not to knock out the consumer credit industry, according to Finance Minister Per Bolund:
Most players currently rely on smaller loans with higher effective interest rates
If this bill goes through, it will still mean a major change for the industry, as most players currently rely on smaller loans with higher effective interest rates. At Malipo, we welcome this change, just as we always did when it comes to regulation for the benefit of the consumer. The industry has long had problems with rogue players where transparency vis-à-vis the customer is very low, with hidden costs such as setup fees, withdrawal fees and the like. Malipo has always been very strict internally with our credit rating assessments, so that all customers should feel they know all the terms and conditions and have a reasonable ability to repay within the specified time.