How the Fast Loan Industry


    Already in mid-October 2016, the report presented “Strengthened consumer protection in the market for high-cost credits”. The investigator and MP John Longstead presented a number of measures to strangle the fast-loan market and now these proposals have finally become reality.


    The bill was voted on in the Riksdag

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    On November 14, 2017, the Government decided that the Commission’s proposal should be sent out on a draft law commission and on January 23, 2018, the Government submitted a bill entitled “Interest Ceilings and Other Measures in the Market for Fast Loans and Other High Cost Credits”. On May 2, 2018, the bill was voted on in Parliament and the new law, which will include an interest rate ceiling, will take effect on September 1, 2018.

    This is not at all surprising since even before the vote there was a parliamentary majority for the proposal. And that the draft law would be stopped by the team council was not very likely.


    About the law in brief

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    So we got a new law for fast loans September 1, 2018 and therefore should give you a brief summary of the law. This summary may be good for those who don’t want to read through the 95-page bill, it’s not particularly amusing, we promise. Otherwise, you will find the bill in its entirety on the government’s website, “Interest rates and other measures in the market for fast loans and other high-cost credits (Prop. 2017/18: 72)” it states.

    The main points that affect both you as a consumer and the companies that offer fast loans look like this:

    • An interest ceiling with an annual interest rate of 40% (in addition to the reference rate) must be introduced. In the past, most sms loans had a few hundred percent interest, but there are also those that have an effective interest rate that exceeds one thousand percent. A thousand per cent interest rate is hardly justifiable, but it is not very strange that a sms loan of a few thousand notes with a 1 month maturity has a few hundred per cent interest rate because the amount is small and it is repaid so quickly. Annual interest rates and effective interest rates are misleading when it comes to short-term loans, since they are not set up in one year, but since the law was introduced, most loans and short-term loans have an annual interest rate of about 30 – 39%.
    • It is also proposed to introduce a cost cap that does not cost any quick loan more than what one has borrowed. The cost cap includes not only the borrowing costs themselves (interest plus fees attached to the credit), but also delays, debt collection and payment order fees. This would put a stop to those lenders who charged too much interest when they lent a larger sum of money over a long period of time. However, the cost ceiling did not cause any lenders to disappear as they simply lowered their interest rates. The disadvantage of the fact that the cost ceiling also includes various penalties and collection fees is that there is a risk that the lender will forward the case to Kronofogden faster. This means that many who otherwise could have received a payment plan with debt collection end up directly with the bailiff instead.
    • It should be more difficult to extend a sms loan, or a high-cost credit that they often use instead of the terms “sms” or “fast loans”. We think that at is quite sensible because fast loans that are extended time and time again can get really expensive, even if the interest rate is 40%. On the other hand, the proposed cost ceiling still prevents the credit from becoming too expensive, so in fact this proposal may be a little superfluous.
    • The consumer must have a higher margin to live on than before, after the loan is taken. This means that customers who take a sms loan must have a better economy than before in order to get a sms loan. Lenders who do not ensure that their customers have good margins can be warned, punished and / or banned.
    • The marketing of sms loans is more moderate than before. This suggestion may be good, but the question is whether it helps so much because most people already know what risks they are taking when applying for a sms loan despite having a poor economy. In addition, the other rules will reduce the risks in any case.


    Regulations is to strengthen consumer protection and it is of course good

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    The fast loan market will probably survive this as well, since you have noted that no players in the industry have so far disappeared. Several players in the industry changed their loans even before the law was introduced and when the rules were introduced on September 1, most had lowered their annual interest rate to about 39%, some even more. Read more about it in our article Reduced interest rates for fast loans and sms loans.