Eight months ago I posted a small teaser on LinkedIn about the Swedish Government’s proposal to revoke the Swedish Consumer Credit Activities Act (Sw. lag (2014:275) om viss verksamhet med konsumentkrediter) (the “Act”) whereas the granting and mediation of consumer credits may only be commenced by banks and credit institutions.
The proposal aims to reduce the type of lending that is considered to drive over-indebtedness.
Now, the Council on Legislation (Sw. lagrådet) (the “Council”) notes that the proposal restricts both the Swedish freedom of business and the EU's freedom of establishment and freedom to provide services, which requires a proportionality assessment. The Council questions whether the restrictions are necessary and effective to achieve the desired goal.
One of the more controversial elements of the proposal is that credit intermediaries should only be allowed to operate with a license for commencing banking or financing business. This would mean that independent consumer credit intermediation would be banned and these entities such as the largest actors Lendo and Sambla would need to apply for a banking or financing business license. Such application is both very costly and time consuming and the license is subject to increased regulatory requirements such as compliance and risk management. The Council sees this as a far-reaching measure and considers that it is not clear that the proposal is necessary to achieve the objective of reducing problematic consumer lending.
Furthermore, the Council believes that the government's arguments for including credit intermediaries are inadequate. Among other things, a lack of moderation in the marketing of certain intermediaries is highlighted, but the Council believes that this problem should rather be dealt with through stricter rules for marketing.
The Council also points out that coordination with the implementation of EU new Consumer Credit Directive would have been more appropriate. The current EU directive contains provisions on both credit intermediation and marketing, and a common approach would have created better conditions for a comprehensive and proportionate regulation.
Against this background, the Council does not agree with the proposal to limit the activities of credit intermediaries and proposes that the issue be further analysed within the framework of the implementation of the Consumer Credit Directive.
It will certainly be exciting to continue to follow the development of the proposal to revoke the Act.
