The Government moves forward with Legislative proposal to increase consumer credit related regulations

Introduction

As part of a number of ongoing legislative reforms targeting consumer credits, the Swedish government has recently taken further steps to regulate the consumer credit market. Having referred a proposal to the Swedish Council on Legislation (Sw. lagrådet) that only authorised banks shall be allowed to act as consumer credit lenders and brokers, the government seeks to substantially increase the regulatory requirements for consumer-facing lenders and brokers and the threshold to market access.[1]

In Setterwalls’ FinTech Report 2024, published in November of 2024, we wrote an article about proposed changes to Swedish consumer credit regulations. In the article, we discussed a memorandum from the Swedish Ministry of Finance, proposing a repeal of the Certain Consumer Credit-Related Operations Act Certain Consumer Credit-related Operations Act (2014:275) (Sw. Lag om viss verksamhet med konsumentkrediter). We also wrote about the criticism the proposal faced, from, amongst others, the Swedish FinTech industry and its representatives.

Content of the proposal

One major criticism of the memorandum was that the proposed legislation would also increase the regulatory requirements for consumer credit institutions which only act as intermediaries, and which do not themselves act as lenders to consumers. The Government has not taken this criticism to heart and has not made any exception for intermediaries or brokers. Instead, the Government’s view is that consumer credit intermediaries often in practice carry out all the preparatory work before a credit agreement is concluded, and that they play a crucial role in the increased ease of access to credit and the increase in borrowers taking out loans which are unsuitable in relation to their repayment ability.[2]

In addition to repealing the Certain Consumer Credit-Related Operations Act, the proposal also includes a new provision to the Banking and Financing Business Act (2004:297) (Sw. lag om bank- och finansieringsrörelse), specifying that only Swedish or foreign credit institutions may conduct business providing or brokering consumer credits (certain other regulated entities will however still be allowed to conduct operations involving consumer credits to a certain extent).

Consequences and entry into force

The proposal entails an unprecedented increase of the regulatory burden for the approximately 70 Swedish consumer credit providers and intermediaries, many of which cannot feasibly comply with the regulatory and capital requirements associated with authorisation as a credit institution. Smaller consumer credit providers, and consumer credit institutions which do not want to conduct banking or financing business, will likely go out of business, and consumers will find it more difficult to access smaller or unsecured credit.

The proposal repeals the Certain Consumer Credit-Related Operations Act from 1 July 2025. However, the Act will still apply until the end of July 2026 for existing authorised consumer credit institutions and will continue to apply for the duration of the licensing process for consumer credit providers which apply for authorisation under the Banking and Financing Business Act no later than July 2026.

[1] Lagrådsremiss – Stärkt konsumentskydd på kreditmarknaden (En. Strenghtened consumer protections in the credit market).

[2] Stärkt konsumentskydd på kreditmarknaden, p. 41.