On 5 June this year, the Administrative Court of Appeal in Stockholm announced that it upholds the Swedish Financial Supervisory Authority’s decision to issue an observation and penalty fee to Resurs Bank regarding inadequate credit assessment procedures.
Last year, the Swedish Financial Supervisory Authority decided to issue Resurs Bank with an observation associated with a penalty fee as a result of the Supervisory Authority’s finding that the bank had failed to take consumers’ financial circumstances sufficiently into consideration in credit assessments. The Consumer Credit Act (2010:1846) requires credit assessments to be based on sufficient information on the consumer’s financial circumstances. The loan may only be granted if the consumer is thus considered to have the financial means to fulfil his or her commitment. As a basis for the decision, the Swedish Financial Supervisory Authority considered that just a credit report obtained through UC [Upplysningscentralen], along with the banks’ scoring model for assessing the loan loss risk, was not sufficient information on which to base the credit decision. The Supervisory Authority considered that the fact that UC’s records are not comprehensive – they contain no information on tax liabilities, debts with CSN and certain high-cost loans, for example – along with the fact that the bank failed to take into consideration the size of the borrowers’ mortgages or expenses in respect of children, housing and other loans, meant that the bank failed to base its credit decisions on sufficient information concerning consumers’ financial circumstances. The bank appealed the decision and the Administrative Court annulled the decision on the grounds that the Swedish Financial Supervisory Authority had failed to show that the information that formed the basis for the bank’s credit assessments was insufficient. The Swedish Financial Supervisory Authority, in turn, appealed the Administrative Court’s ruling. The Administrative Court of Appeal now upholds the appeal and confirms the Swedish Financial Supervisory Authority’s decision.
Unlike the Administrative Court, the Administrative Court of Appeal considers that the information disregarded by the bank in its credit assessment, including the size of housing loans, the number of children in the household and certain other loans, is of such key importance to the individual consumer’s financial circumstances that the bank cannot be considered to have based its credit decisions on sufficient information concerning the individual consumers’ financial circumstances. In the judgment, the Administrative Court of Appeal refers in particular to the fact that the purpose of the Consumer Credit Act is to protect consumers against over-indebtedness and financial difficulties. Since the Administrative Court of Appeal considers that the bank failed to base its credit decisions on sufficient information, the Administrative Court of Appeal, unlike the Administrative Court, finds that there is no reason to adopt a position on the significance of the bank’s loan losses and number of debt collection cases.
