The new concept of “high-cost credit” was introduced not too long ago in the Consumer Credit Act along with interest rate ceilings and some other things. July 1 was the first day for the requirement to mark these credits, both in marketing and on their respective website.

A high-cost credit is, according to the legal text, a credit or loan where the effective interest rate amounts to a maximum of 30 percent plus the reference rate. Since the reference rate is currently 0.00 percent, in practice in 2019 this means that all credits with an effective interest rate above 30 percent should be called high-cost credits.

At the same time as this type of credit was introduced, there was also an interest rate ceiling and a cost ceiling plus tougher rules for both credit tests and marketing of high cost credits. The marketing is particularly interesting as you have to label all loans and credits that exceed the high cost credit limit with a warning text.

July 1 was the first day when this warning text must be available on all high-cost credits. First and foremost is that this credit is a high-cost credit and that you print out the risks that exist, for example, getting a payment note if you don’t pay the debt on time. Finally, one should inform about the possibility of getting help from a budget and debt adviser (which all municipalities must offer free of charge).

All lenders offering SMS loans and other more expensive small loans are forced to label their products as high cost credits

All lenders offering SMS loans and other more expensive small loans are forced to label their products as high cost credits

If you go to any website belonging to a lender that offers SMS loans / quick loans or other expensive loans, where the effective interest rate exceeds 30 percent, then you should see a red warning triangle along with text explaining that it is a high cost credit etc.

This is something that is required by the new law. The Consumer Agency has issued guidelines for houses this warning should look like. The warning should be displayed in a prominent place and if it is about radio advertising or the like where you cannot show a warning then it should be taken orally instead.

The warning triangle, of course, attracts the glances as these are normally associated with something negative and caution is required. It can be understood that many lenders are certainly not completely satisfied with having to show a warning of this kind, as it can deter customers. Of course, it is good that some people, who should not take out a loan, are discouraged, but it can also affect those who can actually afford to borrow.

Since this marking should also be found on all marketing of credits and loans that fall under high-cost credits, other websites that link to them must also have this warning text. Therefore, you can see the warning text adorn this page as well, on the subpages that talk about SMS loans, quick loans and the like.

For our part, printing this information doesn’t matter as much, as we always try to warn of the disadvantages of expensive small loans like SMS loans, but it obviously looks a bit worse when you have to have a big warning with a red warning triangle ahead. Many of the lenders, however, I believe suffer more.

SMS loans are slowly forced away

SMS loans are slowly forced away

When the new interest rate ceiling and the cost ceiling were introduced, it was a tough blow for just SMS loans / quick loans as they exceeded the ceiling a lot in most cases. Most lenders have redone their products and most have switched to offering account credits instead. This still means high fees, but some manage below the limit to call high-cost credit.

With all the new rules and now the warning text, I can see that the future of this type of loan is very tough. The market has already changed drastically as we have certainly looked up to 30-40 lenders who offered this type of loan and today it is down below 10 (although we do not have control of every single lender).

It seems that Sweden has, in principle, managed to completely cut down on SMS loans without directly banning this type of loan, which can be said to be both good but also a little pity for those who actually benefit from these loans and utilized them correctly.

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