As of July 1, 2019, all lenders offering high-cost credits, ie sms, fast loans and online loans with a high annual interest rate, and all those who market high-cost credits must provide their sites with a warning triangle. At the warning triangle, you should also inform your visitors that anyone who takes a high-cost credit and does not repay the entire credit risk getting a payment note and showing where people can turn if they need help with debt counseling.
This was decided by the Government on April 17, 2019, and now it is the Consumer Agency’s task to ensure that this is complied with. You can read more about this at the Consumer Agency where you can also take part in the decision.
What credits must a warning triangle have?
All credits that have a nominal interest rate of 30 – 40% plus the reference rate must have a warning triangle and warning text as these credits are considered high-cost credits. And no credit may have a higher interest rate than in Sweden, not since the interest rate ceiling was introduced last year.
The reference rate follows the repo rate the previous six months but is always rounded up to the nearest half percentage point. Since the repo rate during the first half of 2019 was – 0.25%, the reference rate will be 0% from 1 July to 31 December 2019.
Thus, all loans with a nominal interest rate of 30 – 40% during the second half of 2019 will be counted as high-cost credits until the repo rate change.
Can give lower interest rates in the long run
But what do we think of warning triangle and warning texts when marketing high-cost credits? We don’t mind. Of course, it is just that people are informed that many of the credits on our site are high-cost credits and what can happen if you cannot or do not want to repay, then you risk getting a payment note.
Here at Good Finance, you will find 28 lenders offering fast loans with an interest rate of 30% or higher, which is only one-third of all the credits we present. There are several lenders that offer interest rates just under 30%, such as Good Credit and E-Money, which reasonably need not have any warning triangle.
Hopefully, other lenders see it as a positive omission to have a warning on their website, which could lead to them choosing to lower their interest rates to about 29% or lower. It’s only good for you as a consumer.
We also have some lenders who offer individual interest rates when the interest rate is lower than 30%, but unfortunately, their highest interest rate is higher than 30%, which means that their loans are also classified as high-cost credits. In their case, it might make sense to lower the higher interest rate so that they also avoid the high-cost credit stamp.
Why not warning texts on all credits?
Actually, all credits should be provided but a warning triangle and text. After all, it is hardly only when you take an sms loan that you risk getting a payment note if you do not repay everything you borrowed.
We assume that the government and their investigators believe that the risk that you cannot afford to repay your credit is greater if you take an sms loan than a cheaper loan because the interest rate is so high. That’s not true.
Firstly, we do not think that it is the interest rate itself that makes it difficult for people to pay on their loan, it is rather how much you have to repay each month that is important. If you have taken a private loan with an interest rate of 5% but have to repay USD 1000 a month, it is not easier than if you had taken an sms loan with an interest rate of 39% and have to repay USD 1000 a month. It goes without saying.
The important thing is that the lenders of quick loans and sms loans are accurate when making an assessment of the applicant’s ability to pay because this is really where we think the problem lies with some lenders.
Secondly, sms loans are actually not as big of a problem as other loans throughout. The fact is that the total debt balance at Good Lender due to unpaid private loans is significantly greater than for sms loans. And then we should not talk about debts to the state that make up 80% of the total debt balance at Good Lender. In 2017, we calculated that the sms loans accounted for only 0.16% of the debt. So in a way, other credits should actually have a warning triangle as well.