Lenders Charging Upwards of 800 Percent Get Targeted in Denmark
(Bloomberg) -- Denmark’s financial watchdog is clamping down on lenders offering consumer loans that in some cases have annual interest rates exceeding 800 percent.
So-called “quick loan” companies aren’t doing enough to make sure that borrowers can repay the loans, the Financial Supervisory Authority said on its website. The Copenhagen-based agency reviewed procedures for vetting borrowers at six lenders and found significant differences in procedures for making and documenting credit assessments.
“Simple, undocumented statements are not enough,” Ulla Brons Petersen, head of department at the FSA, said.
The crackdown follows a call by the banking industry to limit how much companies can charge, after a court ruled earlier this year that an annual rate of 760 percent is legal. Such charges are “unsustainable” and don’t benefit consumers, according to Finans Danmark, which called for a 50 percent cap.
Danish households hold the title of Europe’s most deeply in the red, with debt to disposable income of more than 275 percent, according to data compiled by the Organisation for Economic Co-operation and Development.
Most of the debt is in the form of mortgages and doesn’t pose a risk to financial stability, but it can lead to larger fluctuations in consumption and “reduce macroeconomic stability,” Denmark’s central bank said in a December report.
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