On 7 May 2024, the government presented a memorandum concerning repeal of the Certain Consumer Credit-Related Operations Act (”LVK”). In combination with this, it is instead proposed that provision and brokering of consumer credit will be licensable according to the Banking and Financing Business Act (”LBF”).
The effects of the proposal for companies that currently conduct operations according to LVK must be described as significant. According to LBF, requirements pertaining to organisation, capital and the business per se are set at a significantly higher level for companies with a license. An additional consequence will be that all companies that provide consumer credit will need to receive deposits from the public, which means that the companies' financing structure will also be substantially affected. Companies that provide loans within the framework of the Payment Services Act or the Mortgage Business Act are, however, not affected.
The proposal is radical and risks constituting insurmountable obstacles for existing consumer credit institutions. Moreover, it is noteworthy that the proposal has not complied with a traditional legislation process nor involved any reference group in its production, with only a limited impact assessment. In addition, it risks further impeding competition in a lending market that is often described as a market in major need of more competition, which will have the effect of enabling the already dominant actors to further strengthen their position. Furthermore, it can be observed that a large proportion of the technical developments within the banking industry are driven by small fintech companies, which often conduct their operations under a license according to LVK, which makes it highly likely that a repeal of LVK with also impede technical developments in the sector as a whole.
Link to the proposal in its entirety is to be found here. The proposed changes are provisionally scheduled to enter into force on 1 July 2025. According to LVK, companies with an existing license can subsequently continue to conduct their operations, provided that an application for a license in accordance with LBF is received by the Swedish Financial Supervisory Authority no later than 31 July 2026.
The proposal has now been distributed for consultation and responses must be received by the government no later than 9 September 2024. Lindahl is carefully monitoring developments. If you have any questions on how the proposal affects your business, you are welcome to contact us.
