A stable, well-functioning financial market for allA stable, well-functioning financial market for allUnsecured credits for consumers II
On behalf of the government, Finansinspektionen has followed up last year's report "Unsecured credits for consumers". This report sets out the measures that Finansinspektionen has taken, or plans to take, to remedy the shortcomings previously existing in the information and the structure of the contractual terms and conditions and also credit rating. The study covers the same undertakings as last year. We have also studied interest rate trends for unsecured credits in relation to the reference interest rate. During the survey the Swedish Consumer Agency has been consulted.
We have detected shortcomings in contractual terms and conditions, for example the setting out of monthly interest and too much potential for undertakings to raise agreed interest rates. Another shortcoming is that fees not characterised as fees for the credit, are not always set out in price lists or in the contractual terms and conditions. These shortcomings were mentioned in last year's report as well.
Unfortunately the legislation is unclear about how information about these fees should be set out. We consider that this information should be available in writing for consumers before the credit agreement is entered into. We plan to focus on this in a future overhaul of the recommendations regarding this.
We have drawn the attention of the undertakings to their non-compliance with the Consumer Credit Act and FI's general guidelines on consumer credit. They have announced that action has been taken, or will be taken in the autumn, to correct these shortcomings.
Our audit of companies' procedures for credit rating has not led to any comments against individual companies. In the study, procedures have been related to the number of late payments and credit losses suffered by the undertakings in a given period. When granting small amounts of credit the undertakings work consistently with policy rules in combination with credit scoring. The undertakings drew up budgets for consumers' private finances only if the loan requested exceeded an amount determined by that specific undertaking. The level
of this amount varied between the undertakings.
Only two undertakings drew up a budget irrespective of the size of the loan requested. In the undertakings audited, these differences do not seem to have affected late payments or credit losses.
The average nominal credit interest rate of the undertakings audited tracked the movement of the reference interest rate in a range 5–9 percent higher than the reference interest rate. The interest rates of some of the audited undertakings did not track an external interest rate. We pointed this out in our previous report. On 1 July this year the highest interest rate for private lending among the audited undertakings was 30 percent (retail mail order companies) and the lowest 5.88 percent (bank) Interest rates for overdraft facilities are generally higher than those for personal loans.
