New regulations regarding the marketing of credit and private loans in Norway

As of the 1st of July 2017, the Norwegian government has issued new regulations regarding the marketing of products in the private financial sector, specifically loans without security in property or personal assets stemming from bank-loans or credit cards.

Background

Norwegians have acquired increasingly higher debts from unsecured loans over the last decades, and in 2016 alone the total growth in debts of this type reached 15% according to the Norwegian Central Bank. For a lot of people these kinds of loans bare with them a higher degree of personal economic freedom, but are at the same time a source of serious financial issues for some people. Therefore, it is the Financial Departments opinion that the market for these products is not functioning properly, and should be regulated. In the new statements from the government, specifically two issues will be handled by the new regulations:

The aggressive marketing made by the banks and credit institutions, in which they emphasize benefits such as quick granting of loans, immediate transfers of the money to be borrowed, and the simplicity of the application processes, intended to make people apply for loans based on these benefits regardless of whether they need the loans or not
The fact that many people are granted new and expensive loans, even though they are already heavily in debt and unlikely to be able to handle the expensive interests

The new regulations and their implications for consumers and banks

Regulation about the billing of credited debt

The Norwegian Government emphasizes a need for the consumers to attain a better overview of the entire debt they are obliged to pay for a certain loan or credit card. To facilitate this, the Financial Department has made a regulation which requires the financial institutions to inform the individual debtor about the total amount of the debt that he or she has, on every single bill. For the consumer, this means that on each bill he or she receives from the bank, there will be two numbers: both the one which is to be paid this month, and the amount of the entire debt that is owed. In this way, the consumers will attain a better insight into the amount of money actually owed, and is meant to make them more aware of whether or not it is a good decision for them to apply for new loans.

The new law about the information of individual debt

Today, the financial institutions granting private, unsecured loans always do automated checks of the applicants’ private economy in order to consider the persons ability to handle the loan. These are far from perfect, however, and many customers are still able to be granted new loans from new banks, in spite of them already being seriously indebted. To counter this, a new law has been issued by the Norwegian Government, making it mandatory for the banks to run a background check of all applicants in the new debt information-register which is about to be made. In this way, the banks can acquire real-time information about the debts of their applicants, thereby reducing the risk of increasing the debt of already heavily indebted customers.

The new regulations of marketing of unsecured loans

On top of the two preceding regulations, specific regulations have also been issued for the marketing of unsecured loans.

These rules pertain specifically to the way in which the advertisements about unsecured loans are designed by the creditor institutions, and include guidelines such as:

The short time in which one may be granted a loan is not to be emphasized
The simplicity of the application process is not to be emphasized
The availability of relatively high sums of credit is not to be emphasized

Special thanks to Scandilån Norway for sharing this information to us.

Reference sources:
https://www.finansnorge.no/contentassets/43027ea11f4a4741a68b5676046409f9/markedsforing-av-kredittkort-og-forbrukslan-06.02.17.pdf
( All financial companies branch organization)

https://www.regjeringen.no/no/aktuelt/regjeringen-varsler-offensiv-i-markedet-for-forbrukslan/id2547941/
(Government Norway about the issues and warning for offensive marketing in private pay day loans )