Increasing demands on debt

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At the beginning of the year (January 2019), the debt came with good news, the number of people who had claims at debt had decreased from 413,912 to 410,131, a decrease by 3,781. It was the lowest number in 27 years. However, what worried the Crown Chief was that the total debt increased despite the number of people falling.

Thus, fewer people incurred more and more debt in 2018 and since then it has deteriorated further. Yesterday, 2019-09-23, debt came with a new press release showing that this was the case. The number of claims of USD 100,000 – 500,000 increased significantly during the first half of 2019 and has now reached historically high levels. The Crown Magistrate received 15,400 claims on such large sums, which is an increase of 22% compared to the first half of 2018.

Why are the bigger debts increasing?

Why are the bigger debts increasing?


According to debt, it is mainly banks, credit companies and factoring companies (companies that buy old debts) that are behind most of the increase. Andrea Gleerup, unit manager at debt, believes that creditors need to be more careful when assessing the applicants’ finances before granting loans.

The claims that end up with debt when it comes to credit are mainly unsecured loans, but since the requirements are so large (at USD 100,000 – 500,000) it is hardly a matter of high cost credits, that is what people generally call sms and fast loans. No, these loans are not at all large, so it is rather about ordinary private loans offered by banks and some credit companies.

Is not about sms loans



Now, some may think that it may be about quick loans and sms loans. After all, it may be that a person has taken a huge amount of sms loans so that the amount falls to USD 100,000 – 500,000. But no, it is not in this case. The Crown Magistrate explains that they have received 15,400 claims, which are USD 100,000 – 500,000, not that the claims apply to 15,400 persons . Each requirement corresponds to one (1) debt, eg a debt that is due to an unpaid loan. If a person should have two unpaid loans ending up at debt, there are two requirements, not one. And if both of these requirements are USD 100,000 – 500,000, they are included in these statistics. This just shows that it is the usual private loans that are the big problem, not the quick loans.

Now you might think that it is the interest rate ceiling and the other regulations that were introduced on September 1, 2018 that have made sms loans (perhaps) a minor problem. Of course it can be so (which we of course hope), but it is not so certain that it is just about it. According to statistics from debt, which was published on January 17, 2019, unusually few people were registered with debt 2018. It was a historically low level. If now sms loans would be such a big hump should not have happened since the interest rate ceiling was not introduced until September 2018, that is eight months into the year.

Has the interest rate ceiling produced an undesirable effect?



That said, hopefully the interest rate ceiling for sms has reduced the problem of quick loans further, but there may also be a downside to the interest rate ceiling. Long before the interest rate ceiling was introduced, we wrote on Mr. Lender that there is a risk that people will take out larger loans if an interest rate cap is introduced, which in turn increases the risk that the debt at debt will be greater.

That was what happened in Finland after they introduced an interest rate cap, the big debts skyrocketed and the debt burden of the people increased . We also wrote that, according to an EU study, there was no relationship between interest rate ceilings and lower debt in our article on the risk with interest rates . We were also concerned that the interest rate ceiling could have the opposite effect and that the legal community was also skeptical of the interest rate ceiling publisher.