The government is going ahead with a proposal to repeal the Act on certain consumer credit-related operations (LVK)

Background and contents of the proposal

Despite criticism from a number of consultation bodies, the government has now submitted a referral to the Council on Legislation regarding the proposal to repeal lagen (2014:275) om viss verksamhet med konsumentkrediter (“LVK”) [the Act on certain consumer credit-related operations]. Under the proposal, a licence as a bank or credit market company (i.e. credit institution) will instead be required in order to provide or act as an intermediary for consumer loans within the framework of a commercial activity. The proposal is essentially unchanged from the memorandum issued by the Ministry of Finance in May last year.

Exemptions for mortgage institutions and payment service providers

It is noted that mortgage institutions and payment service providers will still be permitted to grant consumer loans, provided that the conditions under the respective rules of business law have been met. For a mortgage institution it therefore means that the loans must be granted as mortgage credits and for a payment service provider it means that the loans must be granted within the framework of a payment transaction in which the funds are subject to a credit limit. There is also a proposal for an amended Mortgage Business Act to clarify that mortgage institutions can continue to provide bridging loans in future.

The government’s justification and criticism

The government justifies the proposal by asserting that consumer credit institutions operating under what is referred to as an LVK licence apply deficient credit assessments and provide high-cost loans to a greater extent than credit institutions. It is consequently claimed that consumer credit institutions are part of the basic problem of over-indebtedness. There appears to be no clear basis for this justification, particularly when it is viewed in the light of the outcome of the Swedish Financial Supervisory Authority’s audits of LVK companies’ credit assessments, since no intervention measures were adopted as a result.

Regulation and future legislative measures

It should also be noted that consumer credit institutions and credit institutions are subject to the same rules when it comes to credit assessments and establishing interest rates, which is why it does not seem appropriate to use the proposal to attack a completely different regulation. This is particularly true considering that the government is also tightening the rules for the interest rate cap in March 2025 and has also taken note of a proposal from the Consumer Credit Inquiry on how the requirements for credit assessments should be tightened within the framework of the implementation of the new Consumer Credit Directive. It seems somewhat tone-deaf to base the approach on, in our opinion, such a misguided and restrictive proposal instead of first allowing the well-targeted legislative measures to take effect and then carrying out an assessment of whether the consumer credit institutions should be blamed for the existing problem of over-indebtedness.

Timetable for the Government Bill and parliamentary debate

A final Government Bill can be expected in just over a month. Subsequently, the government has announced in its preliminary list of bills that the parliamentary debate is expected to take place on 18 March 2025.