Kåre Lilleholt, University of Oslo Consumer credit and responsible lending in Norway

Consumer loans Loans taken by consumers, irrespective of purpose Mainly non-secured loans –but mortgage loans for other purposes than acquisition of the property are common Loans for extremely short periods and other consumer loans Credit cards, overdraft facilities etc. –not dealt with here, but may serve the same purposes

Legislation and supervision EEA agreement and EU rules –free movement of capital and freedoms of establishment –requirement of license; supervision –credit institutions with Norwegian branches and subsidiaries –cross-border consumer credit? Financial Contracts Act Rules on unfair terms etc. Marketing Act

Loans for extremely short periods Folkia AS (Monetti) –Credit period 30 days –NOK 1000–5000 (EUR 125–625) –APR up to 9245

Other consumer loans Example Bank Norwegian –Credit period one year or more –NOK 5000– (EUR 625–50 000) –Nominal interest rate 8,99–21,44 Other banks Intermediaries

Financial Contracts Act Also implementing Directive 2008/48 Advertising Pre-contractual information Duty to explain Duty to warn Formal requirements

Procedures, exemplified by Folkia AS Advertising (dir. art. 4) –amount, period, credit costs (representative example) on the Internet Pre-contractual information (dir. art. 5) –“in good time”, contract details, on paper or other durable medium; but exceptions for voice telephony communication Assessment of creditworthiness (dir. art. 8) –credit information agencies –no credit database

ctd. procedures Explanations to the consumer (dir. art. 5(6)) –by phone? Warning against taking up the loan –written and, if possible, verbally –written confirmation by consumer –breach may lead to adjustment of the consumer’s obligations

ctd. procedures Written agreement (dir. 10) –use of electronic medium is allowed –the contract must be available –secure method of authentication –current dispute with the Consumer Ombudsman Returning customers –are offered “SMS loans” –overdraft facility? –current dispute with the Consumer Ombudsman

Formation of Contracts Act Contracts void for usury? –not applied in practice General clause on unfair terms –mostly a question of sufficient information

Marketing Act Control of marketing Control of terms in standard contracts Both by the Consumer Ombudsman

Responsible lending and over- indebtedness No financial crisis – so far –employment numbers –bankruptcies –debt recovery Requirements for owner’s capital Capital requirements for banks Housing bubble? Duty to warn against credit seems to be of small practical relevance